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 | ||
My book,
Getting Started in Chart Patterns, Second Edition
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Partial declines are looping chart patterns that appear at the end of broadening patterns and rectangles. They predict an immediate upward breakout but are not always correct.
New research (as of November 2013) says that when a partial decline occurs, post-breakout performance improves. That's a surprise since I expected momentum to suffer.
| Characteristic | Discussion |
| Established | The rectangle or broadening chart pattern should be an established one, meaning that it should obey all of the identification guidelines for that pattern. Don't look for a partial decline until you have a completed rectangle or broadening chart pattern. |
| Top trendline | Price should touch the top trendline and move down but not touch or come that close to the bottom trendline before heading back up. When price touches the upper trendline, it usually stages an immediate upward breakout. Sometimes, it may linger at the upper trendline before breaking through. If price bounces downward, close out your position. |
| Breakout | Upward. This usually occurs immediately after the partial decline touches the upper trendline. |
| Pause | Price often pauses partway across a chart pattern so it may look like a partial decline is forming. Wait for price to head back up before buying the stock. |
| Trading Tactic | Explanation |
| Price loop | If price bounces off the upper trendline and heads back down, then rounds over before coming close to the bottom trendline, then it may be a partial decline. Buy once it's clear that price is heading back toward the upper trendline. |
| Fibonacci | A trend reversal at the 50% or 62% Fibonacci retrace of the prior up move may signal a partial decline. |
| Pause | Price may pause at the upper trendline, perhaps slide along it before breaking out upward. |
| Exit | Exit your position if price bounces off the upper trendline and heads back down. |
| Breakout | Expect an upward breakout after a partial decline. |
The following table shows how often a partial decline correctly predicts an upward breakout in bull markets.
| Chart Patterns | Success Rate |
| Broadening bottoms | 80% |
| Broadening formations, right-angled and ascending | 81% |
| Broadening formations, right-angled and descending | 63% |
| Broadening tops | 72% |
| Broadening wedges, ascending | 35% |
| Broadening wedges, descending | 87% |
| Rectangle bottoms | 80% |
| Rectangle tops | 91% |
The above figure shows an example of a partial decline in a broadening bottom chart pattern. By the time the partial decline appeared, the broadening bottom had enough trendline touches to qualify as a valid chart pattern. Price attempted to touch the bottom trendline but did not make it. The reversal suggested an upward breakout was in the offing and that was exactly what happened.
This is based on new research using stock information from 3/1989 to 11/11/13. Not all stocks covered the entire period. I used broadening formations (all six types) and rectangles (tops and bottoms) in the research. Those patterns can show partial declines.
I compared the performance of 5,959 chart patterns with and without partial declines. This answers the question, "Does performance improve if a partial decline is missing?
The answer is no.
The 903 chart patterns with partial declines showed post breakout gains that averaged 33%. That compares to gains from 1,840 chart patterns that did not show a partial decline. Their gain averaged 29%. Thus, a partial decline is good for performance.
-- Thomas Bulkowski
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