Pipe Bottoms

As of 01/17/2025

Indus: 43,488 +334.70 +0.8%

Trans: 16,431 -169.75 -1.0%

Utils: 1,013 +1.53 +0.2%

Nasdaq: 19,630 +291.91 +1.5%

S&P 500: 5,997 +59.32 +1.0%

YTD

+2.2%

+3.4%

+3.0%

+1.7%

+2.0%

Targets Overview: 01/15/2025

44,700 or 41,600 by 02/01/2025

17,200 or 15,700 by 02/01/2025

1,050 or 950 by 02/01/2025

20,500 or 18,670 by 02/01/2025

6,100 or 5,700 by 02/01/2025

Chart Pattern Indicator:

on 1/13/25

As of 01/17/2025

Indus: 43,488 +334.70 +0.8%

Trans: 16,431 -169.75 -1.0%

Utils: 1,013 +1.53 +0.2%

Nasdaq: 19,630 +291.91 +1.5%

S&P 500: 5,997 +59.32 +1.0%

YTD

+2.2%

+3.4%

+3.0%

+1.7%

+2.0%

Targets Overview: 01/15/2025

44,700 or 41,600 by 02/01/2025

17,200 or 15,700 by 02/01/2025

1,050 or 950 by 02/01/2025

20,500 or 18,670 by 02/01/2025

6,100 or 5,700 by 02/01/2025

Chart Pattern Indicator:

on 1/13/25

Bulkowski on Pipe Bottoms

If you click on the above link and then buy the book (or anything) while at Amazon.com, the referral will help support this site. Thanks.

Pipe bottoms are okay performers in a bull market when performance is measured on the weekly scale. However, compared against other patterns on the same scale, they place last. Pipes have a small break even failure rate and high average rise. Discovered by Thomas Bulkowski in 1998.

Pipe Bottom: Important Bull Market Results

The above numbers are based on more than 8,800 perfect trades. See the glossary for definitions.

Pipe Bottom: Identification Guidelines

Characteristic	Discussion
Weekly chart	Pipes appear on the daily scale but the ones on the weekly charts perform better. Use the weekly chart.
Price trend	Usually downward leading to the pattern.
Shape	Twin and adjacent downward spikes. On a bar chart, the two price bars look like spikes. On a candlestick chart, the candles can be any shape (from doji to Marubozu). In other words, don't let the term spike mislead you.
Overlap	The 2 weeks often have a large price overlap but need not bottom at the same price. The bottom price variation is 1%.
Volume	Most pipes show above average volume on one or both spikes.
Obvious	The pipe should stand-alone and be obvious on the chart. The spike should clear the surrounding price action.
Downtrends	The best performing pipes appear at the end of downtrends.
Confirmation	The pattern confirms (becomes a valid pattern) when price closes above the highest high in the pattern.

Pipe Bottom: Trading Tips

Trading Tactic	Explanation	The Measure Rule Spike
Measure rule	Compute the height from the taller of the two spikes to the lower of the two (the AB distance in the Measure Rule figure to the right) then multiply by the above 'percentage meeting price target.' Add the difference to the higher of the two (A) to get a price target, C.
Buy	Buy when price closes above the higher of the two spikes. I show that as A in the Measure Rule figure to the right.
Trends	Pipes with a short-term (up to 3 months) downtrend leading to the pipe perform best.
Uneven lows	Pipes with uneven lows tend to perform better than do those with spikes that bottom at the same price. The Spike figure shows an example of spikes with uneven lows (spike B is lower than spike A).
Yearly low	Pipes within a third of the yearly low perform best.
Volume	Heavy left spike volume when compared to the right suggests better performance.
Stop	If price closes below the lower of the two spikes, then close out your position.

Pipe Bottom: Example

The above figure shows an example of a pipe bottom chart pattern. This pipe bottom appears as part of a retrace in an uptrend, signaling higher prices ahead. The retrace begins at A and bottoms at the pipe then price begins its recovery. Shown on the weekly scale.

Pipe Bottom: Target Exit, Stock Performance

Using the ACMR figure, for trading I place a stop loss order a penny below the lower of the two pipe spikes, and a buy stop a penny above the top of the highest pipe spike. The target is the difference between the highest and lowest price in the pipe, multiplied by two, and added to the highest price in the pattern. I show the approximate locations of each on the chart. If a buy and sell order happens on the same day, I don't take the trade. That's a flaw with the test, but using the daily chart, I can't tell if the sell occurred before the buy (or not).

For a more detailed explanation of the method I used to test the pattern, see the link.

Testing

The following table shows results for bull markets with upward breakouts. I used 497 stocks in the test.

Testing Pipe Bottoms in Stocks with Height Exit
Metric	Pipe Day In Uptrend	Uptrend Benchmark	Pipe In Downtrend	Downtrend Benchmark
Trades	1,631	8,215	1,508	5,751
Average profit/loss per trade	$402.11	$200.96	$384.80	$253.78
Win/loss ratio	52%	45%	50%	47%
Average hold time (days)	68	53	68	53
Winning trades	842	3,690	756	2,712
Average gain of winners (days)	16%	12%	16%	13%
Average hold time of winners	150	71	42	73
Losing trades	789	4,525	752	3,039
Average loss	-8%	-6%	-8%	-7%
Average hold time of losers (days)	53	46	138	50

Pipe bottoms on the weekly scale beat the benchmark for both trend directions. Pipes in uptrends do particularly well.

Pipe Bottom: Target Exit, ETF Performance

The following discusses pipe bottoms using a target exit as already explained. I used 94 exchange traded funds (ETFs) instead of common stocks.

Testing Pipes in ETFs with Height Exit
Metric	Pipe Day In Uptrend	Uptrend Benchmark	Pipe In Downtrend	Downtrend Benchmark
Trades	353	5,984	243	3,946
Average profit/loss per trade	$377.47	$174.53	$167.01	$180.35
Win/loss ratio	52%	46%	42%	46%
Average hold time (days)	92	61	92	61
Winning trades	185	2,762	102	1,805
Average gain of winners (days)	14%	10%	14%	11%
Average hold time of winners	188	82	127	97
Losing trades	168	3,222	141	2,141
Average loss	-8%	-5%	-8%	-6%
Average hold time of losers (days)	150	49	68	60

Pipes in uptrend substantially outperform the benchmark ($377.47 versus $174.53), but should be avoided in downtrends.

Pipe Bottom: Target Exit, Crypto Performance