Trading Rectangle Bottoms

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 Rectangle Bottoms: Summary

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 from either a rectangle bottom or a busted one (price breaks out downward, drops no more than 10%, reverses, and closes above the top of the pattern. Buy as price rises above the top of the pattern).

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).

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 Rectangle Bottoms: 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 rectangle bottom 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.

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

Trading Rectangle Tops: Stops

I used a stop loss order set a penny below the bottom of the chart pattern. 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 rectangle bottoms and sold various non-busted patterns (ascending triangles, broadening tops, head-and-shoulders tops, and so on), I made an average of 80% ("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 6% but also trimmed the average loss to 5%. Using a 25% trailing stop allowed me to keep more money, 33%, but losses climbed to 14%. If I didn't use any type of stop, the gain averaged 198% with losses averaging 30%.

The results don't show a clear trend among the rows, columns and type (busted or non-busted).

Trading Rectangle Bottoms: Busted Patterns

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	6% (-5%)	11% (-8%)	19% (-11%)	33% (-14%)	80% (-11%)	198% (-30%)
Busted buys, non-busted sales	5% (-6%)	12% (-9%)	25% (-11%)	40% (-13%)	56% (-8%)	133% (-40%)
Non-busted buys, busted sales	8% (-5%)	12% (-8%)	19% (-12%)	31% (-14%)	84% (-10%)	206% (-28%)
Busted buys, busted sales	5% (-5%)	13% (-8%)	26% (-12%)	38% (-13%)	63% (-8%)	150% (-39%)

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 (up to 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.

I found that the highest rate of success for busted patterns was 45%. If you bought a non-busted rectangle bottom and sold a busted pattern, that combination would only succeed 45% of the time over the non-busted buy and non-busted sale combination.

According to the contest results, avoid trading using busted chart patterns.

Trading Rectangle Bottoms: Non-busted Buy, Non-Busted Sale

Table 2: Busted or Non-Busted Contest Winners
	Sell Non-Busted Pattern	Sell Busted Pattern
Buy non-busted pattern	N/A (benchmark)	45%
Buy busted pattern	23%	27%

Table 3 shows statistics I collected for rectangle bottoms 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 chart pattern (after buying).

For example, if you were to buy the upward breakout from a rectangle bottom 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 99% on the 185 (56 winners, 129 losers) trades. That's an average of 350% on your winners, 10% average loss on your losers. You'd find that only 30% of the trades made money but you'd gain an average of 38% per year (ranking 19th 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 almost triple your money (184% per trade).

The expectancy averaged $3.18 per share per trade which ranks 78th where 1 is the best value.

Notes: The rank is based on the net gain for all four performance tables (tables 3 to 6) shown below. Trades with sample counts below 30 are not ranked.

Table 3: Statistics for rectangle bottoms
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank
Broadening bottom	350%	-10%	99%	38%	19	184%	56/129	30%	$3.18	78
Broadening top	340%	-10%	93%	38%	18	186%	95/229	29%	$16.04	9
Broadening formation, right-angled and ascending	246%	-9%	56%	29%	51	160%	43/125	26%	$2.42	83
Broadening formation, right-angled and descending	274%	-10%	64%	28%	58	98%	31/88	26%	$5.56	45
Broadening wedge, ascending	352%	-9%	93%	54%	4	260%	26/66	28%	$3.55	76
Broadening wedge, descending	180%	-9%	48%	25%	68	102%	20/47	30%	$4.17	62
Bump-and-run reversal top	199%	-10%	65%	37%	24	150%	124/222	36%	$8.27	24
Diamond bottom	246%	-11%	59%	23%	74	92%	10/27	27%	$5.61	44
Diamond top	252%	-8%	71%	38%	16	188%	37/84	31%	$4.10	64
Adam & Adam double top	568%	-9%	142%	48%	7	300%	186/522	26%	$15.24	10
Adam & Eve double top	388%	-10%	78%	37%	25	191%	71/251	22%	$11.83	12
Eve & Adam double top	318%	-10%	75%	29%	54	225%	89/256	26%	$5.66	43
Eve & Eve double top	552%	-10%	145%	63%	1	228%	105/277	27%	$19.42	5
Falling wedge	479%	-8%	134%	57%	2	201%	24/58	29%	$16.93	8
Head-and-shoulders top	340%	-9%	86%	38%	20	201%	311/830	27%	$6.20	39
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank
Head-and-shoulders, complex top	145%	-10%	36%	18%	89	89%	65/155	30%	$4.44	59
Rectangle top	193%	-9%	47%	21%	79	82%	66/175	27%	$4.10	65
Rising wedge	284%	-9%	83%	38%	22	167%	99/216	31%	$8.33	23
Rounding top	219%	-11%	47%	19%	82	124%	47/139	25%	$4.52	56
Ascending scallop	207%	-12%	49%	28%	55	141%	20/52	28%	$3.66	73
Descending scallop	277%	-10%	74%	34%	35	157%	178/431	29%	$4.52	57
Scallop, inverted and ascending	277%	-10%	79%	26%	65	204%	17/38	31%	$4.84	52
Scallop, descending and inverted	233%	-10%	46%	24%	70	129%	76/249	23%	$5.80	42
Triangle, ascending	269%	-9%	78%	38%	21	184%	62/135	31%	$6.22	38
Triangle, descending	282%	-10%	82%	36%	28	117%	59/128	32%	$4.83	53
Triangle, symmetrical	293%	-10%	66%	29%	52	156%	152/454	25%	$5.03	51
Triple top	313%	-9%	71%	32%	41	159%	256/772	25%	$9.32	18
Rectangle bottom	354%	-11%	77%	37%	23	109%	39/122	24%	$1.69	89
3 falling peaks	295%	-10%	74%	32%	42	193%	309/817	27%	$5.15	50
Roof	464%	-9%	84%	52%	5	195%	12/49	20%	$2.70	81
Roof, inverted	149%	-11%	35%	16%	94	145%	23/58	28%	$3.82	71
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank

Trading Rectangle Bottoms: Busted Buy, Non-Busted Sale

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

Table 4 shows the performance of busted rectangle bottoms 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 pattern (after buying).

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

For example, buying a rectangle bottom with a busted downward breakout in a bull market (the entry price is really the higher of a penny above the top of the pattern or the opening price) and selling after the downward breakout from a broadening bottom shows winners averaging gains of 325%. Losses average 8%, for a net of 55%. Annualized that's 32% (ranking 44th). Only 58 trades occurred with a win/loss ratio of 19%. If you traded this as a buy-and-hold position, meaning no stops were used, the net gain climbed to 130%. Expectancy was a gain of $2.09 per share, ranking 84th where 1 is best.

Table 4: Statistics for Busted Buys, Normal Sales
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank
Broadening bottom	325%	-8%	55%	32%	44	130%	11/47	19%	$2.09	84
Broadening top	315%	-7%	55%	31%	46	135%	17/71	19%	$6.46	35
Broadening formation, right-angled and ascending	209%	-8%	32%	23%	73	146%	11/48	19%	$1.83	86
Broadening formation, right-angled and descending	263%	-7%	55%	26%	66	66%	9/30	23%	$5.25	48
Broadening wedge, ascending	228%	-9%	67%			128%	9/19	32%
Broadening wedge, descending	262%	-6%	48%	20%	81	75%	6/24	20%	$3.07	79
Bump-and-run reversal top	204%	-7%	37%	39%	14	117%	24/90	21%	$1.82	87
Diamond bottom	589%	-9%	154%			191%	3/8	27%
Diamond top	217%	-7%	41%	31%	47	175%	8/29	22%	$2.72	80
Adam & Adam double top	449%	-8%	89%	36%	27	205%	50/187	21%	$8.38	21
Adam & Eve double top	454%	-8%	91%	39%	15	325%	23/84	21%	$9.66	17
Eve & Adam double top	372%	-7%	70%	31%	45	217%	21/82	20%	$3.85	70
Eve & Eve double top	341%	-7%	66%	36%	30	156%	22/83	21%	$7.84	27
Falling wedge	460%	-6%	38%	34%	34	117%	3/29	9%	$0.10	93
Head-and-shoulders top	209%	-7%	39%	25%	67	165%	82/303	21%	$4.08	66
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank
Head-and-shoulders, complex top	289%	-8%	48%	40%	13	111%	13/56	19%	$1.41	92
Rectangle top	197%	-7%	50%	23%	72	107%	24/62	28%	$4.33	61
Rising wedge	175%	-7%	48%	31%	48	155%	36/84	30%	$3.92	67
Rounding top	256%	-7%	41%	21%	76	198%	12/53	18%	$4.81	54
Ascending scallop	74%	-7%	16%	17%	92	60%	9/23	28%	$1.53	91
Descending scallop	159%	-7%	33%	19%	85	105%	58/179	24%	$6.88	31
Scallop, inverted and ascending	573%	-8%	126%			179%	6/20	23%
Scallop, descending and inverted	339%	-7%	53%	43%	11	116%	22/106	17%	$1.63	90
Triangle, ascending	244%	-9%	49%	27%	61	162%	10/34	23%	$5.96	41
Triangle, descending	196%	-8%	20%	19%	86	62%	8/51	14%	-$0.42	95
Triangle, symmetrical	290%	-7%	59%	33%	37	144%	40/140	22%	$5.49	47
Triple top	273%	-7%	52%	26%	63	135%	74/275	21%	$3.90	69
Rectangle bottom	242%	-8%	42%	18%	90	53%	10/40	20%	$9.95	15
3 falling peaks	319%	-7%	84%	33%	36	160%	118/306	28%	$7.36	29
Roof	72%	-8%	11%			95%	4/13	24%
Roof, inverted	106%	-7%	21%			71%	5/15	25%
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank

Trading Rectangle Bottoms: Non-busted Buy, Busted Sale

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 rectangle bottom and selling only after a busted chart pattern appears). A stop loss order was used and priced a penny below the bottom of the chart pattern (after buying).

For example, buying a rectangle bottom with an upward breakout in a bull market and selling a busted broadening bottom shows winning trades making an average of 237%. Losing trades lost 9% giving a net gain of 57%. The annualized gain is 18% in this case, giving the setup a rank of 88 (where 1 is best). If you traded this without a stop, the net gain climbed to 143%. Of the stocks I looked at, I found 71 trades with 27% of them winning. Expectancy was $4.14 per share, ranking 63 where 1 is best.

Table 5: Statistics for Normal Buy, Busted Sale
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank
Broadening bottom	237%	-9%	57%	18%	88	143%	19/52	27%	$4.14	63
Broadening top	259%	-9%	70%	25%	69	164%	40/96	29%	$6.44	36
Broadening formation, right-angled and ascending	305%	-10%	65%	22%	75	149%	13/42	24%	$5.50	46
Broadening formation, right-angled and descending	210%	-8%	48%	21%	78	134%	17/49	26%	$3.71	72
Broadening wedge, ascending	243%	-9%	52%			147%	7/22	24%
Broadening wedge, descending	157%	-8%	39%	17%	91	119%	11/28	28%	$3.66	74
Bump-and-run reversal bottom	205%	-8%	47%			63%	6/17	26%
Cup with handle	81%	-8%	3%			80%	3/21	13%
Diamond bottom	711%	-7%	232%	56%	3	374%	11/22	33%	$18.19	6
Diamond top	252%	-7%	29%	19%	83	151%	8/49	14%	$10.05	14
Adam & Adam double bottom	783%	-9%	115%	44%	10	268%	35/188	16%	$17.97	7
Adam & Eve double bottom	637%	-10%	158%	49%	6	251%	33/94	26%	$36.70	1
Eve & Adam double bottom	390%	-9%	69%	28%	57	243%	18/74	20%	$4.52	58
Eve & Eve double bottom	429%	-10%	107%	37%	26	195%	29/80	27%	$25.92	2
Falling wedge	147%	-9%	21%	17%	93	99%	12/51	19%	$0.02	94
Head-and-shoulders bottom	288%	-8%	82%	33%	39	147%	65/149	30%	$11.60	13
Head-and-shoulders complex bottom	240%	-8%	83%	30%	49	96%	14/24	37%	$6.66	33
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank
Rectangle top	226%	-8%	66%	26%	64	133%	39/84	32%	$8.35	22
Rising wedge	156%	-6%	61%	26%	62	134%	16/23	41%	$6.65	34
Round bottom	297%	-8%	10%			92%	1/16	6%
Rounding top	155%	-9%	28%	20%	80	57%	8/27	23%	$1.79	88
Ascending scallop	218%	-9%	70%	28%	56	150%	21/39	35%	$8.86	19
Descending scallop	239%	-14%	73%	24%	71	126%	13/25	34%	$4.38	60
Scallop, inverted and ascending	365%	-10%	128%	44%	9	209%	35/60	37%	$25.85	3
Scallop, descending and inverted	221%	-9%	66%	21%	77	169%	17/35	33%	$6.74	32
Triangle, ascending	384%	-10%	110%	42%	12	168%	24/55	30%	$25.83	4
Triangle, descending	318%	-9%	99%	38%	17	160%	30/61	33%	$7.88	26
Triangle, symmetrical	289%	-8%	80%	32%	40	172%	89/211	30%	$6.99	30
Triple bottom	377%	-8%	100%	36%	29	202%	93/238	28%	$8.41	20
Rectangle bottom	122%	-9%	10%	9%	95	44%	10/58	15%	$2.70	82
3 rising valleys	332%	-9%	78%	32%	43	208%	50/147	25%	$9.76	16
Roof	324%	-7%	50%			80%	4/19	17%
Roof, inverted	431%	-9%	104%	35%	31	199%	9/26	26%	$14.67	11
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank

Trading Rectangle Bottoms: Busted Buy, Busted Sale

Table 6 shows the last combination of trading statistics. It shows busted rectangle bottoms as the entry signal and various busted chart patterns as the exit signal. A stop loss order was used and priced a penny below the bottom of the chart pattern (after buying).

For example, buying a busted rectangle bottom and selling a busted broadening top made 325% from the winners, lost 7% on the losers for a net gain of 69%. Annualized, it was 33%. The net gain placed the performance of this setup at 38, where a rank of 1 is best. Removing stops from the trades allowed them to make 237%. Only 57 trades were taken and 23% of them were winners. Expectancy was a gain of $1.84 per share, ranking 85th among the four tables.

Table 6: Statistics for Busted Buys and Sales
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank
Broadening bottom	62%	-8%	2%			87%	2/13	13%
Broadening top	325%	-7%	69%	33%	38	237%	13/44	23%	$1.84	85
Broadening formation, right-angled and ascending	334%	-8%	106%			156%	4/8	33%
Broadening formation, right-angled and descending	165%	-9%	33%			107%	5/16	24%
Broadening wedge, ascending	19%	-9%	-4%			113%	1/5	17%
Broadening wedge, descending	110%	-8%	21%			205%	2/6	25%
Bump-and-run reversal bottom	397%	-6%	151%			224%	7/11	39%
Cup with handle	1781%	-5%	218%			254%	1/7	13%
Diamond bottom	457%	-8%	225%			252%	5/5	50%
Diamond top	430%	-7%	108%			160%	5/14	26%
Adam & Adam double bottom	355%	-7%	44%	19%	84	253%	9/54	14%	$7.69	28
Adam & Eve double bottom	557%	-8%	122%	46%	8	224%	11/37	23%	$7.93	25
Eve & Adam double bottom	616%	-8%	81%	34%	32	304%	5/30	14%	$5.22	49
Eve & Eve double bottom	294%	-7%	81%	29%	53	107%	10/24	29%	$4.73	55
Falling wedge	83%	-7%	28%			206%	5/8	38%
Head-and-shoulders complex bottom	105%	-7%	31%			84%	4/8	33%
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank
Rectangle top	162%	-6%	32%	27%	59	109%	10/34	23%	$3.56	75
Rising wedge	101%	-5%	19%			135%	6/20	23%
Round bottom	25%	-6%	2%			-41%	1/3	25%
Rounding top	24%	-11%	1%			9%	1/2	33%
Ascending scallop	364%	-8%	57%			88%	4/19	17%
Descending scallop	125%	-9%	8%			72%	2/14	13%
Scallop, inverted and ascending	186%	-8%	46%	27%	60	124%	13/34	28%	$6.31	37
Scallop, descending and inverted	335%	-7%	116%			166%	9/16	36%
Triangle, ascending	216%	-7%	35%			103%	5/22	19%
Triangle, descending	80%	-7%	15%			101%	6/17	26%
Triangle, symmetrical	215%	-7%	32%	18%	87	103%	19/89	18%	$3.48	77
Triple bottom	340%	-6%	72%	34%	33	151%	30/102	23%	$3.90	68
Rectangle bottom	217%	-6%	33%			70%	3/14	18%
3 rising valleys	284%	-7%	59%	30%	50	167%	19/65	23%	$6.17	40
Roof	917%	-8%	223%			261%	2/6	25%
Roof, inverted	113%	-6%	13%			50%	2/10	17%
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank

Trading Rectangle Bottoms: 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 chart pattern. 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.

Buy non-busted patterns with a short-term (up to 3 months) duration from the trend start to the pattern's start. When buying busted patterns, use the medium term (3 to 6 months)

Moving Averages: 50- and 200-Day SMA

Table 7: Short (S) Medium (M) or Long (L) Trend Start and Performance
	Sell Non-Busted Pattern	Sell Busted Pattern
Buy non-busted pattern	S104% M53% L3%	S113% M54% L4%
Buy busted pattern	S59% M81% L29%	S62% M116% L28%

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).

Buy non-busted rectangle bottoms when the breakout price is above the 50-day SMA. Buying busted patterns below the 50-day SMA work well.

Table 8: Above (A) Below (B) 50-Day Simple Moving Average
	Sell Non-Busted Pattern	Sell Busted Pattern
Buy non-busted pattern	A90% B73%	A93% B77%
Buy busted pattern	A20% B74%	A17% B89%

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, buy rectangle bottoms when the breakout price is below the 200-day SMA.

Selling First Bearish Chart Pattern

The prior discussion assumes you buy an rectangle bottom (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 9: Above (A) Below (B) 200-Day Simple Moving Average
	Sell Non-Busted Pattern	Sell Busted Pattern
Buy non-busted pattern	A73% B89%	A84% B83%
Buy busted pattern	A35% B77%	A33% B95%

Table 10 shows the results sorted by the type of patterns involved (busted or non-busted). For example, if you buy a non-busted rectangle bottom and sell the first non-busted chart pattern which comes along, you'd make 23% on average. Annualized, you'd make 51%. This compares to a 35% 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).

Selling the first pattern which comes along works only when selling non-busted patterns.

The bottom half of the table shows expectancy for the four combinations. Please note that the $5.15 expectancy uses only 28 samples.

Bulkowski on Pattern Pairs: Rectangle Bottoms