As of 05/18/2022
  Indus: 31,490 -1,164.52 -3.6%  
  Trans: 13,692 -1,096.25 -7.4%  
  Utils: 992 -9.94 -1.0%  
  Nasdaq: 11,418 -566.37 -4.7%  
  S&P 500: 3,924 -165.17 -4.0%  
YTD
-13.3%  
-16.9%  
 +1.1%  
-27.0%  
-17.7%  
  Targets    Overview: 05/15/2022  
  Up arrow33,500 or 30,500 by 06/01/2022
  Up arrow15,500 or 13,700 by 06/01/2022
  Up arrow1,050 or 940 by 06/01/2022
  Up arrow12,800 or 11,000 by 06/01/2022
  Up arrow4,250 or 3,850 by 06/01/2022
CPI (updated daily): Arrows on 4/21/22
As of 05/18/2022
  Indus: 31,490 -1,164.52 -3.6%  
  Trans: 13,692 -1,096.25 -7.4%  
  Utils: 992 -9.94 -1.0%  
  Nasdaq: 11,418 -566.37 -4.7%  
  S&P 500: 3,924 -165.17 -4.0%  
YTD
-13.3%  
-16.9%  
 +1.1%  
-27.0%  
-17.7%  
  Targets    Overview: 05/15/2022  
  Up arrow33,500 or 30,500 by 06/01/2022
  Up arrow15,500 or 13,700 by 06/01/2022
  Up arrow1,050 or 940 by 06/01/2022
  Up arrow12,800 or 11,000 by 06/01/2022
  Up arrow4,250 or 3,850 by 06/01/2022
CPI (updated daily): Arrows on 4/21/22

Bulkowski on Pattern Pairs: Ascending Triangles

 

Initial release: 11/24/2021.

The idea behind pattern pairs is to pick a chart pattern type (like broadening bottoms with upward breakouts) to buy and another to sell (like double tops). You buy the upward breakout from the broadening bottom, hold for a few years, and sell when a double top appears and breaks out downward. Along the way, you give price a chance to rise far enough to overcome those trades which are stopped out for a loss. This is a trend-following strategy.

Trading Ascending Triangles: Summary

Picture of the pattern pairs.

The figure illustrates the idea for trading pattern pairs, where price is the red line and the boxes are chart patterns. This articles assumes you buy an upward breakout either from an ascending triangle or from a busted ascending triangle (price breaks out downward, drops no more than 10%, reverses, and closes above the top of the ascending triangle). Buy as price rises above the top of the ascending triangle.

On the sale side, you can sell the first bearish chart pattern which comes along or wait for your favorite bearish chart pattern to appear and sell then.

Here's a list of the top five performing sell signals, based on annualized gain (annualized because the hold time is often years, in parenthesis).

Sell a...

The following list shows the expected performance of chart pattern pairs, ranked by their expectancy. Expectancy is a way of gauging winning and losing trades and how much money you might make trading a pattern pair. I put the expected profit per trade, per share, in parenthesis.

Trading using a busted chart pattern results in worse performance than using non-busted patterns (at least for ascending triangles as the buy signal).

To improve performance, try these tips.

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Trading Ascending Triangles: Entry and Exit Conditions

The databases I built over several decades doesn't identify every chart pattern. There may be plenty of double tops over the years, for example, that I didn't catalog on the way to the one I did catalog. So buying an upward breakout from a ascending triangle and selling at the double top I cataloged would be different than choosing to sell a different double top. However, the following analysis does give a real-world flavor for how well you might do trading chart patterns if you follow the pattern pair strategy.

Here's what I used in my analysis.

I used the following 43 chart patterns in the analysis, but some only applied if they were busted.

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Trading Ascending Triangles: Stops

I used a stop loss order set a penny below the bottom of the ascending triangle. Price on the way down may have gapped below the stop price (for the sale price), so I used the lower of the stop price or the opening price on the day of sale).

For trailing stops, I removed the stop loss order and used a trailing stop set at 10%, 15%, 20%, or 25% below a peak, never lowering the stop value, but raising it if a higher peak came along during the trade.

In Table 1, I calculated the percentage net gain (the average of gains and losses) when using various trailing stop loss amounts (10%, 15%, 20%, and 25%) for all tested chart patterns according to the busted/non-busted buy/sell configuration. In parenthesis is the size of the average loss so I could detail how losses change with various stop loss orders.

For example, if I tested non-busted ascending triangles and sold various non-busted patterns (ascending triangles, broadening tops, head-and-shoulders tops, and so on), I made an average of 41% ("Stop Loss Only" column) after having a stop loss order in place. Losses averaged 11%. Replacing the stop loss with a 10% trailing stop cut the gain to 5% but also trimmed the average loss to 6%. Using a 25% trailing stop allowed me to keep more money, 23%, but losses climbed to 14%. If I didn't use any type of stop, the gain averaged 95% with losses averaging 28%.

The results show that:

Table 1: Various Trailing Stop Settings: Net Profit and (Average Loss)
Data 10%  15%  20%  25%  Stop Loss 
Only
 No Stop
Non-busted buys, non-busted sales 5% (-6%)  10% (-8%)  16% (-11%)  23% (-14%)  41% (-11%)  95% (-28%) 
Busted buys, non-busted sales 4% (-6%)  8% (-8%)  9% (-10%)  13% (-13%)  20% (-8%)  58% (-32%) 
Non-busted buys, busted sales 5% (-5%)  10% (-8%)  16% (-11%)  21% (-13%)  34% (-10%)  81% (-27%) 
Busted buys, busted sales 4% (-6%)  8% (-8%)  11% (-11%)  13% (-13%)  13% (-7%)  55% (-27%) 

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Trading Ascending Triangles: Busted Patterns

Trading using a busted chart pattern often results in worse performance than using non-busted patterns (at least for ascending triangles as the buy signal).

Table 2 shows what I found when comparing the performance of non-busted patterns (both buy and sell) with busted and non-busted chart patterns. In 22 or 31 contests (22 or 31 different chart pattern types, depending on which apply), I compared the three combinations of busted and non-busted buy and sell signals to non-busted buy and sell signals. The table below shows the percentage of time the busted combination beat the non-busted combination in the contests.

For example, I found that busted patterns won 32% (7) of the 22 contests when trading using a busted pattern for the sale. The worst performance came from trading (both buying and selling) using busted patterns. That configuration showed performance which fell short of non-busted patterns.

Table 2: Busted or Non-Busted Contest Winners
 Sell Non-Busted PatternSell Busted Pattern
Buy non-busted patternN/A (benchmark)32%
Buy busted pattern13%0%

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Trading Ascending Triangles: Non-busted Buy, Non-Busted Sale

Picture of a busted pattern pair.

Table 3 shows statistics I collected for ascending triangles using the trading rules described above and shown in the figure. A stop loss order was used and priced a penny below the bottom of the ascending triangle (after buying).

For example, if you were to buy the upward breakout from an ascending triangle chart pattern and hold it until you encountered a broadening bottom (the first chart pattern listed in the table), but one with a downward breakout, you'd net an average of 43% on the 173 (44 winners, 129 losers) trades. That's an average of 205% on your winners, 12% average loss on your losers, and holding onto the position an average of 2.2 years. You'd find that only 25% of the trades made money but you'd gain an average of 20% per year (ranking 25th where 1 is best). If you removed the stop loss order and just held on until the broadening bottom with a downward breakout appeared, you'd make an average of 93% per trade.

The expectancy averages $2.95 per share per trade which ranks 43rd where 1 is the best value. Using my data to trade, you'd average $295 per trade.

Notes: All of the above numbers appear in the table except for the average hold time (2.2 years). The rank is based on the net gain for all four performance tables (tables 3 to 6) shown below.

Table 3: Statistics for ascending triangles
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank
Broadening bottom205%-12%43%20%2593%44/12925%$2.9543
Broadening top136%-11%34%18%3697%98/21931%$5.5415
Broadening formation, right-angled and ascending102%-10%27%20%2561%63/13033%$1.5164
Broadening formation, right-angled and descending134%-12%28%17%3759%32/8627%$2.7246
Broadening wedge, ascending153%-11%49%34%1115%46/7837%$2.7345
Broadening wedge, descending168%-11%45%32%296%26/5731%$3.1239
Bump-and-run reversal top100%-12%39%30%483%212/25246%$3.5734
Diamond bottom88%-12%18%13%5981%13/3130%$0.3178
Diamond top129%-12%37%20%25102%47/8735%$3.3036
Adam & Adam double top248%-10%62%28%6142%209/54028%$6.798
Adam & Eve double top128%-11%30%15%50115%114/27130%$3.4135
Eve & Adam double top205%-11%46%23%14135%101/27927%$4.8220
Eve & Eve double top118%-11%28%16%4483%147/34530%$2.8544
Falling wedge196%-12%40%25%971%25/7525%-$0.6283
Head-and-shoulders top177%-10%44%24%12104%397/97429%$4.2827
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank
Head-and-shoulders, complex top130%-12%38%25%992%77/14135%$3.9831
Rectangle top164%-11%35%22%1874%54/15326%$4.0030
Rising wedge150%-10%37%22%1882%112/26730%$2.9842
Rounding top168%-11%47%20%2573%75/15533%$5.9112
Ascending scallop167%-11%62%30%477%46/6741%$4.5824
Descending scallop180%-11%43%23%1481%174/44428%$2.1453
Scallop, inverted and ascending232%-11%70%24%12151%11/2233%$6.0211
Scallop, descending and inverted181%-11%43%26%878%121/30728%$2.2352
Triangle, ascending169%-11%42%23%1497%74/17630%$3.0140
Triangle, descending164%-12%45%25%965%93/19532%$1.2966
Triangle, symmetrical151%-12%31%17%3777%179/51126%$2.3651
Triple top159%-11%39%19%3296%269/64629%$5.0417
Rectangle bottom134%-12%16%10%7164%30/12220%$0.0779
3 falling peaks204%-12%48%22%1898%261/68328%$3.6732
Roof76%-10%19%12%6496%27/5533%$1.9258
Roof, inverted116%-13%27%13%5974%29/6431%$3.0041
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank

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Trading Ascending Triangles: Busted Buy, Non-Busted Sale

Picture of a busted pattern pair.

The figure shows the setup for this scenario. When price busts the bearish chart pattern (downward breakout from a ascending triangle in a bull market), buy. Sell after a downward breakout from the target chart pattern.

Table 4 shows the performance of busted ascending triangles for the entry and sales after downward breakouts from various bearish chart patterns. A stop loss order was used and priced a penny below the bottom of the ascending triangle (after buying).

A busted ascending triangle has a downward breakout but price drops no more than 10% before reversing and moving above the top of the ascending triangle. Buy when price moves at least a penny above the top of the busted ascending triangle. Sell after price drops at least a penny below the target chart pattern.

For example, buying an ascending triangle with a busted downward breakout in a bull market (the entry price is really the higher of a penny above the top of the triangle or the opening price) and selling after the downward breakout from a broadening bottom shows winners averaging gains of 74%. Losses average 7%, for a net of 5%. Only 56 trades occurred with a win/loss ratio of 14%. This scenario ranks the annualized net gain as 87th among the four tables. If you traded this as a buy-and-hold position, meaning no stops were used, the net gain climbed to 45%. Expectancy was $1.26 per share, ranking 68th where 1 is best.

Trades with sample counts below 30 are not ranked.

Table 4: Statistics for Busted Buys, Normal Sales
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank
Broadening bottom74%-7%5%5%8745%8/4814%$1.2668
Broadening top109%-7%21%17%3762%20/6224%$1.9657
Broadening formation, right-angled and ascending84%-8%11%7%7915%10/3920%$0.4577
Broadening formation, right-angled and descending68%-8%8%5%8718%7/2721%-$0.1980
Broadening wedge, ascending112%-9%37%68%11/1838%
Broadening wedge, descending83%-7%19%13%5932%12/2929%$2.4050
Bump-and-run reversal top100%-8%28%20%2566%36/7233%$3.5833
Diamond bottom220%-9%53%121%3/827%
Diamond top97%-9%15%13%5966%9/3123%-$0.8385
Adam & Adam double top164%-8%26%17%37102%59/24220%$6.729
Adam & Eve double top80%-8%11%8%7770%23/8721%$3.1738
Eve & Adam double top100%-7%21%14%5365%43/12326%$4.2029
Eve & Eve double top113%-8%30%16%4468%48/10631%$4.5923
Falling wedge39%-8%5%22%7/1729%
Head-and-shoulders top133%-8%25%17%3759%105/34823%$2.7147
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank
Head-and-shoulders, complex top57%-8%14%11%6551%24/4734%$0.5676
Rectangle top64%-8%8%7%7928%14/5122%$2.1354
Rising wedge61%-7%8%6%8437%28/9822%$1.1169
Rounding top38%-8%-2%-3%9219%6/4312%-$1.8591
Ascending scallop235%-9%40%108%4/1620%
Descending scallop132%-8%24%15%5057%32/10723%$3.3036
Scallop, inverted and ascending160%-7%0%66%1/224%
Scallop, descending and inverted121%-8%20%17%3750%20/7322%$0.7673
Triangle, ascending105%-8%13%14%5330%17/7618%$1.0771
Triangle, descending127%-8%20%17%3720%14/5321%$1.5663
Triangle, symmetrical98%-8%12%10%7144%45/19019%$1.9059
Triple bottom184%None184%184%1/0None
Triple top136%-8%24%15%5067%73/25622%$4.7821
Rectangle bottom29%-9%-3%-3%92-6%7/3616%-$1.9192
3 falling peaks142%-7%22%16%4466%54/22020%$1.7561
Roof143%-6%36%42%4/1029%
Roof, inverted88%-7%28%19%3252%11/1937%$11.152
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank

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Trading Ascending Triangles: Non-busted Buy, Busted Sale

Picture of a busted pattern pair.

The figure shows an example of how this trade unfolds.

A bullish chart pattern appears and you buy at the breakout. Continue holding until your selected chart pattern appears. The chart pattern is bullish because it has an upward breakout but then things go wrong. Price reverses. Sell when the stock dips below the bottom of the chart pattern (meaning it busts the upward breakout).

Table 5 shows the performance statistics for this setup (buying a normal ascending triangle and selling only after a busted chart pattern appears). A stop loss order was used and priced a penny below the bottom of the ascending triangle (after buying).

For example, buying a ascending triangle with an upward breakout in a bull market and selling a busted broadening bottom shows winning trades making an average of 103%. Losing trades lost 10%, giving a net of 17%. Because the hold time is often years long, the annualized gain is 11%, giving the setup a rank of 65 (where 1 is best). If you traded this without a stop, the net gain climbed to 33%. Of the stocks I looked at, I found 58 trades with 24% of them winning. Expectancy was a loss of $0.35 per share, ranking 82nd where 1 is best. A negative expectancy means you'll be hard pressed to make money trading this pair often.

Trades with sample counts below 30 are not ranked.

Table 5: Statistics for Normal Buy, Busted Sale
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank
Broadening bottom103%-10%17%11%6533%14/4424%-$0.3582
Broadening top116%-10%27%16%4476%43/10230%$6.2310
Broadening formation, right-angled and ascending124%-12%33%14%5385%18/3633%$2.4649
Broadening formation, right-angled and descending50%-10%10%6%8449%22/4334%$1.1169
Broadening wedge, ascending67%-12%10%94%8/2029%
Broadening wedge, descending102%-9%16%11%6561%11/3822%$0.5875
Bump-and-run reversal bottom79%-9%12%7%7984%12/3924%-$0.2181
Cup with handle43%-12%5%1%7/1532%
Diamond bottom91%-10%14%7%7963%8/2624%-$1.2288
Diamond top118%-9%15%10%7163%11/4819%$1.9855
Adam & Adam double bottom181%-10%37%16%44120%62/18925%$5.6714
Adam & Eve double bottom129%-11%23%11%6568%35/11124%$1.9855
Eve & Adam double bottom215%-10%47%21%22121%25/7525%$6.907
Eve & Eve double bottom83%-12%9%4%8953%22/7922%-$0.9886
Falling wedge65%-12%13%10%7147%19/4032%$0.9172
Head-and-shoulders bottom206%-9%52%22%1890%76/19029%$5.7313
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank
Head-and-shoulders complex bottom148%-9%39%16%4463%11/2531%$18.301
Rectangle top151%-10%43%21%2299%40/8133%$8.166
Rising wedge102%-11%28%14%5362%23/4434%-$5.3693
Round bottom102%-11%28%14%5362%23/4434%-$5.3693
Rounding top121%-13%25%55%7/1828%
Ascending scallop151%-11%36%27%789%32/7829%$1.3465
Descending scallop50%-11%-1%-1%9120%5/2716%-$1.4089
Scallop, inverted and ascending133%-11%37%14%5386%43/8833%$4.3626
Scallop, descending and inverted144%-8%47%23%1472%13/2336%$4.2528
Triangle, ascending108%-11%32%20%2565%45/8036%$4.9818
Triangle, descending81%-13%16%11%6547%28/6430%$1.6462
Triangle, symmetrical166%-10%40%20%2593%98/25028%$4.6222
Triple bottom182%-11%47%19%3284%88/20530%$4.4525
Rectangle bottom102%-10%23%11%6543%17/4129%$1.7760
3 rising valleys203%-10%47%21%2298%54/14727%$5.1216
Roof132%-11%47%65%9/1341%
Roof, inverted228%-10%64%31%3108%10/2231%$10.063
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank

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Trading Ascending Triangles: Busted Buy, Busted Sale

Picture of a busted pattern pair.

Table 6 shows the last combination of trading statistics. It shows busted ascending triangles as the entry signal and various busted chart patterns as the exit signal. Keep in mind that some trades were few. A stop loss order was used and priced a penny below the bottom of the ascending triangle (after buying).

The associated figure shows the setup.

For example, buying and selling a busted broadening top (second data line in the table) made 78% from the winners, lost 9% on the losers for a net gain of 9%. Annualized, it was 10%. The net gain placed the performance of this setup at 73rd, where 1 is best. Removing stops from the trades allowed them to make 44%. Only 43 trades were taken and 21% of them were winners. Expectancy was a loss of $0.65 per share.

Trades with sample counts below 30 are not ranked.


Table 6: Statistics for Busted Buys and Sales
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank
Broadening bottom25%-7%-5%-2%1/205%
Broadening top78%-9%9%10%7344%9/3421%-$0.6587
Broadening formation, right-angled and ascending32%-7%-4%22%1/128%
Broadening formation, right-angled and descending52%-7%9%43%6/1627%
Broadening wedge, ascending69%-5%3%70%1/811%
Broadening wedge, descending42%-8%6%31%7/1828%
Bump-and-run reversal bottom6%-7%-5%57%3/1517%
Cup with handleNone-13%-13%-26%0/70%
Diamond bottom29%-7%-1%104%3/1418%
Diamond top93%-7%12%53%5/2219%
Adam & Adam double bottom154%-7%31%19%33105%21/6923%$8.865
Adam & Eve double bottom61%-8%-4%-5%9750%3/565%-$1.4693
Eve & Adam double bottom89%-6%10%6%8758%6/2917%$4.9419
Eve & Eve double bottom138%-8%26%13%6169%8/2624%$10.054
Falling wedge91%-8%17%46%5/1525%
Head-and-shoulders bottom91%-7%10%7%8233%17/8317%$1.2969
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank
Head-and-shoulders complex bottom30%-6%-4%35%1/137%
Rectangle top85%-8%15%8%7958%9/2725%$2.6951
Rising wedge30%-7%4%28%4/1029%
Round bottomNone-7%-7%79%0/30%
Rounding topNone-7%-7%35%0/80%
Ascending scallop82%-9%28%71%6/940%
Descending scallop66%-7%11%90%2/625%
Scallop, inverted and ascending69%-7%10%10%7355%7/2423%$0.6377
Scallop, descending and inverted0%-7%-6%-4%1/128%
Triangle, ascending28%-8%0%0%9313%9/3123%-$1.0890
Triangle, descending59%-8%11%52%8/2029%
Triangle, symmetrical152%-7%30%22%1858%26/8523%$3.4536
Triple bottom141%-7%24%16%4598%21/7821%$4.6422
Rectangle bottom16%-6%1%-1%5/1131%
3 rising valleys59%-7%8%8%7936%11/4022%$2.9246
Roof42%-6%12%95%3/538%
Roof, inverted41%-9%0%34%2/918%
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank

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Trading Ascending Triangles: Performance Improvements

Here are a few ideas the data suggested which may improve performance of your pattern pairs trading.

Trend Start: Short, Medium, or Long

Find the trend start for your ascending triangle. Often you can just look at a chart and see where the trend begins. If not, or you want to be sure, then the glossary describes how to find it.

Determine the length from the trend start to the pattern's start: short term (less than 3 months), medium term (3 to 6 months) or long term (more than 6 months).

Table 7 shows the results for the four combinations of busted/non-busted trades and the resulting performance.

Buying patterns with a short-term (up to 3 months) duration from the trend start to the pattern's start results in significantly better performance in most cases.

Notice that busted buy patterns (bottom row in the table) underperform non-busted buys in most cases. Don't trade a busted ascending triangle.

Table 7: Short (S) Medium (M) or Long (L) Trend Start and Performance
 Sell Non-Busted PatternSell Busted Pattern
Buy non-busted patternS58% M41% L12%S53% M35% L8%
Buy busted patternS21% M42% L2%S20% M19% L1%

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Moving Averages: 50- and 200-Day SMA

I checked two moving averages at buy time, 50- and 200-day simple moving averages (not as a crossover setup). I compared the breakout price to the value of the moving average. Table 8 shows the performance of buying or selling busted or non-busted patterns when the breakout price was above (A) or below (B) the 50-day simple moving average (SMA).

Notice that buying non-busted patterns outperformed buying busted ones (compare the two rows). I found that buying a non-busted triangle when the breakout price was above the moving average resulted in better performance (43% versus 30%) than if the buy price was below the SMA. Interpret the other cells as appropriate for your situation.

Table 8: Above (A) Below (B) 50-Day Simple Moving Average
 Sell Non-Busted PatternSell Busted Pattern
Buy non-busted patternA43% B30%A30% B57%
Buy busted patternA21% B16%A13% B12%

Table 9 shows the results of using a longer moving average, the 200-day. Traders often use this as a proxy for the long-term trend.

In three of four table cells, buying when the breakout price is below the 200-day SMA gives the best result. The exception is when trading non-busted patterns. They perform best when the breakout price is above the moving average.

Table 9: Above (A) Below (B) 200-Day Simple Moving Average
 Sell Non-Busted PatternSell Busted Pattern
Buy non-busted patternA43% B36%A33% B38%
Buy busted patternA13% B45%A7% B38%

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Selling First Bearish Chart Pattern

The prior discussion assumes you buy a ascending triangle (busted or non-busted) but sell a chart pattern of your choosing, such as a downward breakout from a head-and-shoulders top (you wait for one to appear). What if you sold the first bearish chart pattern which comes along? How would you do?

Table 10 shows the results sorted by the type of patterns involved (busted or non-busted). For example, if you buy a non-busted ascending triangle and sell the first non-busted chart pattern which comes along, you'd make 25% on average. Annualized, you'd make 23%. This compares to a 22% annualized gain if you sell a designated pattern (like you waited for a double top before selling, which may or may not be the first bearish chart pattern to come along).

The best results come from buying a non-busted ascending triangle and selling the first non-busted pattern which appears. That combination makes 25% annually, beating the other annualized rates.

The bottom half of the table shows expectancy for the four combinations. Probably due to few trades (63), the highest expectancy is to buy a busted ascending triangle and sell the first busted pattern which appears. The expectancy for that combination is a whopping $9.06 per share.

Table 10: Selling the First Bearish Pattern (Annualized)
 Sell Non-Busted PatternSell Busted Pattern
Buy non-busted pattern25% (23% v 22%)16% (13% v 17%)
Buy busted pattern19% (17% v 14%)11% (11% v 10%)
Expectancy (Below)
 Sell Non-Busted PatternSell Busted Pattern
Buy non-busted pattern$3.30$1.16
Buy busted pattern$3.51$9.06

-- Thomas Bulkowski

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