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%	Targets    Overview: 12/12/2024     44,200 or 41,750 by 01/01/2025   16,100 or 17,700 by 01/01/2025   1,050 or 975 by 01/01/2025   20,500 or 19,300 by 01/01/2025   6,100 or 5,775 by 01/01/2025
Chart Pattern Indicator: on 12/5/24

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%
Targets    Overview: 12/12/2024     44,200 or 41,750 by 01/01/2025   16,100 or 17,700 by 01/01/2025   1,050 or 975 by 01/01/2025   20,500 or 19,300 by 01/01/2025   6,100 or 5,775 by 01/01/2025
Chart Pattern Indicator: on 12/5/24

Bulkowski on Buying Low or High

Should you buy near the yearly low or use upward momentum to buy near the yearly high, surfing to a higher high? Research indicates that buying near the yearly low gives you better gains with lower risk.

Buy Low or High: Average Rise or Decline

I looked at 12,385 chart patterns using 25 different chart pattern types in 500 stocks from 1991 to 1996 and another 739 stocks from 1995 to 2005, encompassing both a bull and bear market. I wanted to know if it is better to buy within a third of the yearly low or buy within a third of the yearly high. Table 1 shows the results.

Let's take the lowest 10% column where it shows 42% (179). That means the average rise in a bull market from an upward breakout was 42% and 179 samples qualified. To qualify, the breakout must have been within 10% of the yearly trading range from the yearly low. The next column uses a third from the low, and so on until the last column. The last column is a mirror of the lowest 10% except it applies to the yearly high. Patterns that qualify are within 10% or less of the yearly price range below the yearly high.

Regardless of the breakout direction and market condition the average rise and the average decline are higher as the buy point approaches the yearly low.

Buy Low or High: Failure Rate

What about risk? Does the risk of failure increase when you buy low? The next table shows the answer.

Table 2 shows how often price fails to rise at least 5%, 10%, 15%, and so on in a bull market after an upward breakout from a chart pattern. Bull market/upward breakouts showed the highest sample counts (in parentheses) so that's why they were chosen. The sample counts are slim for the lowest 10%, but the trend is clear, especially when comparing the lowest third column with the columns to the right.

Failure rates decrease the closer to the yearly low the breakout occurs. In short, it means buy a chart pattern breakout near the yearly low, not the high, and stay out of the middle.

-- Thomas Bulkowski

See Also

• Best buy price. The best buy price is $20 or below.
• Best buy days. Which day of the week is the best one to buy or sell?
• Best buy months. Can buying at the end of the worst performing month and selling at the best performing be profitable?
• Failures. Which months show the most failures?
• Seasonality. What are the best months to buy and sell stocks?
• Holidays. Does the market rise or fall before and after holidays?
• Failure rates. Chart patterns fail more often than before.
• The best performing chart patterns over 1, 2, and 3 months.
• The nature of bottoms.
• Finding the Market Bottom

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