As of 12/20/2024
Indus: 42,840 +498.02 +1.2%
Trans: 15,892 +32.54 +0.2%
Utils: 986 +14.76 +1.5%
Nasdaq: 19,573 +199.83 +1.0%
S&P 500: 5,931 +63.77 +1.1%
|
YTD
+13.7%
0.0%
+11.9%
+30.4%
+24.3%
|
 44,200 or 41,750 by 01/01/2025 16,100 or 17,700 by 01/01/20251,050 or 975 by 01/01/202520,500 or 19,300 by 01/01/20256,100 or 5,775 by 01/01/2025 |
As of 12/20/2024
Indus: 42,840 +498.02 +1.2%
Trans: 15,892 +32.54 +0.2%
Utils: 986 +14.76 +1.5%
Nasdaq: 19,573 +199.83 +1.0%
S&P 500: 5,931 +63.77 +1.1%
|
YTD
+13.7%
0.0%
+11.9%
+30.4%
+24.3%
| |
|
44,200 or 41,750 by 01/01/202516,100 or 17,700 by 01/01/20251,050 or 975 by 01/01/202520,500 or 19,300 by 01/01/20256,100 or 5,775 by 01/01/2025 | ||
Updated with trading lessons on 6/5/2024.
A big W is a double bottom with tall sides. Price often confirms the double bottom and approaches the height of the left side trend start before retracing and forming a handle. Once price completes the handle, the rise resumes.
The above numbers are based on more than 2,100 samples. See the glossary for definitions.
| Characteristic | Discussion |
| Price trend | Downward leading to the pattern. |
| Shape | A big W shape with twin bottoms and tall sides. |
| Reversal pattern | Look for a double bottom reversal pattern at the base of the big W. |
| Tall sides | The best performing big W chart patterns have tall, straight declines leading to the bottom of the big W. |
| Rise between bottoms | The rise between the valleys of the double bottom is 10% to 20% or more. |
| Volume | Recedes 69% of the time. |
| Breakout Confirmation | The pattern confirms as a valid one when price closes above the highest peak between the two bottoms. |
Consult the associated figure on the right.
| Trading Tactic | Explanation | 
The Measure Rule
|
| Measure rule | Compute the height from the highest peak to the lowest valley (D-B) and then add the result to the price of the peak high D). The result is the target price. The link to the left gives more information about the measure rule. | |
| Breakout | Occurs when price closes above the peak high (D). | |
| Stall | For swing traders, buy at the double bottom low (E) and ride price upward to confirmation of the double bottom (the high between the two bottoms, D). Price often pauses there. If price drops below the low of the second bottom (E), exit the position immediately. If price confirms the double bottom, expect a rise approaching the left side high (A). | |
| Position traders | Wait for confirmation of the double bottom before taking a position and be prepared to sell as the stock nears the price of the left side high (the price at C approaches the price at A). |
The above figure shows an example of a big W chart pattern. Price begins its decline at A and reaches a low at B in just a few months. Price bounces and retraces to form a second low in September (C). The Eve & Adam double bottom confirms as a valid chart pattern when price closes above the confirmation line, as shown. A pretty symmetrical triangle appears during October.
I present the information in slider format, so be sure to click the left or right arrows to view another slide.
If you believe in Elliott wave, then look for an ABC correction. After price advances in 5 waves (higher in this case), you'll see price drop, retrace, and drop again as the red ABC lettering shows. After the ABC pattern ends, we see a Big W form. The belief is that you'll see price rise again in 5 or more waves. If that's true (I don't know if it is), then this setup is a high probability winner.
The green circle outlines the ABC pattern.
In the chart pattern world, an ABC correction is called a measured move down (MMD). In a MMD, price drops, retraces, and drops again. However, after the pattern completes, look for a return to the corrective phase.
Using letters, the measured move is ABCD. Leg CD is supposed to equal leg AB, but rarely does. The corrective phase is BC and it posed overhead resistance to an advance.
In this example, the stock reversed in the corrective phase, causing a loss.
Here's an example of an event pattern called a bad earnings surprise. After the announcement of earnings, the market doesn't like the results and the stock gaps downward. After a week to 10 days, you'll often see price bottom and start to rise. However, because earnings are so important, the stock may falter and reverse as in the case here, resulting in a losing trade.
In other words, check news on the stock. If it's not good, then pick another stock.
Sometimes a chart screams that a pattern is forming. In this case, the chart pattern is a head-and-shoulders top. I show the left shoulder and head. I drew a green line to signal where to enter the trade, but already the potential head-and-shoulders was visible. I'd avoid the trade because of the bearish head-and-shoulders top.
Indeed, a right shoulder formed and the stock returned to the level of the launch price.
-- Thomas Bulkowski
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