As of 12/07/2022
  Indus: 33,598 +1.58 +0.0%  
  Trans: 13,768 -130.21 -0.9%  
  Utils: 973 -6.18 -0.6%  
  Nasdaq: 10,959 -56.34 -0.5%  
  S&P 500: 3,934 -7.34 -0.2%  
YTD
-7.5%  
-16.4%  
-0.8%  
-30.0%  
-17.5%  
  Targets    Overview: 12/01/2022  
  Up arrow35,500 or 32,800 by 12/15/2022
  Down arrow13,400 or 14,500 by 12/15/2022
  Up arrow1,000 or 925 by 12/15/2022
  Up arrow12,000 or 10,600 by 12/15/2022
  Up arrow4,250 or 3,850 by 12/15/2022
CPI (updated daily): Arrows on 12/5/22
As of 12/07/2022
  Indus: 33,598 +1.58 +0.0%  
  Trans: 13,768 -130.21 -0.9%  
  Utils: 973 -6.18 -0.6%  
  Nasdaq: 10,959 -56.34 -0.5%  
  S&P 500: 3,934 -7.34 -0.2%  
YTD
-7.5%  
-16.4%  
-0.8%  
-30.0%  
-17.5%  
  Targets    Overview: 12/01/2022  
  Up arrow35,500 or 32,800 by 12/15/2022
  Down arrow13,400 or 14,500 by 12/15/2022
  Up arrow1,000 or 925 by 12/15/2022
  Up arrow12,000 or 10,600 by 12/15/2022
  Up arrow4,250 or 3,850 by 12/15/2022
CPI (updated daily): Arrows on 12/5/22

Bulkowski on Pattern Pairs: Symmetrical Triangles

Initial release: 12/17/2021.

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 Symmetrical 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 from either a symmetrical triangle 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.

Buy a busted symmetrical triangle and sell a busted...

To improve performance, try these tips.

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Trading Symmetrical 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 symmetrical 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 Symmetrical Triangles: 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 symmetrical triangles and sold various non-busted patterns (ascending triangles, broadening tops, head-and-shoulders tops, and so on), I made an average of 27% ("Stop Loss Only" column) after having a stop loss order in place. Losses averaged 9%. Replacing the stop loss with a 10% trailing stop cut the gain to 4% but also trimmed the average loss to 6%. Using a 25% trailing stop allowed me to keep more money, 20%, but losses climbed to 15%. If I didn't use any type of stop, the gain averaged 160% with losses averaging 30%.

Most trailing stops (except 25%) gave better results when applied to busted buy 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 4% (-6%)  7% (-9%)  13% (-11%)  20% (-15%)  27% (-9%)  160% (-30%) 
Busted buys, non-busted sales 5% (-5%)  9% (-10%)  15% (-12%)  22% (-13%)  29% (-10%)  100% (-23%) 
Non-busted buys, busted sales 3% (-6%)  6% (-9%)  12% (-11%)  17% (-14%)  22% (-9%)  164% (-29%) 
Busted buys, busted sales 5% (-5%)  8% (-10%)  14% (-12%)  17% (-12%)  25% (-10%)  87% (-26%) 

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Trading Symmetrical Triangles: Busted Patterns

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 58%. If you bought a busted symmetrical triangle and sold a non-busted pattern, that combination succeeded 58% of the time over the non-busted buy and non-busted sale combination.

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

Table 2: Busted or Non-Busted Contest Winners
 Sell Non-Busted PatternSell Busted Pattern
Buy non-busted patternN/A (benchmark)41%
Buy busted pattern58%36%

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

Picture of a busted pattern pair.

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

For example, if you were to buy the upward breakout from a symmetrical 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 14% on the 397 (72 winners, 325 losers) trades. That's an average of 129% on your winners, 11% average loss on your losers. You'd find that only 18% of the trades made money but you'd gain an average of 9% per year (ranking 85th 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 average 48% per trade.

The expectancy averaged a loss of $0.83 per share per trade which ranks 110th where 1 is the best value. It means you'll struggle to make money trading this pattern pair.

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 symmetrical triangles
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank
Broadening bottom129%-11%14%9%8548%72/32518%-$0.83110
Broadening top137%-10%27%18%2875%199/58925%$4.4037
Broadening formation, right-angled and ascending121%-10%18%14%5351%89/31622%$1.4084
Broadening formation, right-angled and descending93%-11%12%9%8925%58/20922%$2.3870
Broadening wedge, ascending252%-11%72%45%2110%72/15632%$2.8960
Broadening wedge, descending88%-10%15%10%8030%54/16025%$1.4383
Bump-and-run reversal top124%-11%34%26%673%241/48733%$5.5022
Diamond bottom140%-12%25%19%2486%21/6524%$0.1498
Diamond top101%-10%26%17%3062%98/20532%$3.4449
Adam & Adam double top205%-9%36%20%17110%428/160721%$5.2925
Adam & Eve double top148%-10%22%13%6381%172/68520%$4.7633
Eve & Adam double top167%-9%26%16%4089%194/77920%$3.5546
Eve & Eve double top114%-10%19%13%6669%245/78824%$4.2441
Falling wedge88%-10%10%8%9234%45/17321%-$0.26106
Head-and-shoulders top188%-10%39%25%893%750/228425%$3.4548
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank
Head-and-shoulders, complex top100%-11%17%13%6252%125/36226%$1.5580
Rectangle top108%-10%14%11%7543%99/38121%$2.2573
Rising wedge115%-10%21%14%4877%198/60525%$3.5347
Rounding top127%-10%21%12%7252%100/34123%$2.7361
Ascending scallop253%-11%55%44%374%48/14325%$0.5297
Descending scallop160%-10%23%19%2264%241/99819%$2.2972
Scallop, inverted and ascending161%-10%24%14%47102%22/8920%$6.1616
Scallop, descending and inverted186%-10%29%24%1054%128/51320%$0.7594
Triangle, ascending132%-10%29%20%1975%128/33428%$2.7162
Triangle, descending99%-11%16%11%7332%122/37425%-$0.09103
Triangle, symmetrical124%-10%21%15%4662%347/113923%$2.3471
Triple top160%-10%28%18%2674%530/183422%$4.9630
Rectangle bottom70%-11%3%2%11110%51/24117%-$0.30107
3 falling peaks189%-9%31%23%1382%448/173021%$2.6763
Roof87%-9%17%11%7665%33/9027%$2.9259
Roof, inverted114%-10%24%17%3474%59/15827%$5.1827
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank

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Trading Symmetrical 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 (busts a downward breakout from a symmetrical triangle in a bull market), buy. Sell after a downward breakout from the target chart pattern.

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

A busted symmetrical triangle 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 symmetrical 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 pattern or the opening price) and selling after the downward breakout from a broadening bottom shows winners averaging gains of 121%. Losses average 11%, for a net of 19%. Annualized that's 13% (ranking 65th). Only 124 trades occurred with a win/loss ratio of 23%. If you traded this as a buy-and-hold position, meaning no stops were used, the net gain climbed to 42%. Expectancy was a gain of $0.01 per share, ranking 100 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 bottom121%-11%19%13%6542%28/9623%$0.01100
Broadening top117%-10%29%19%2366%72/16630%$8.369
Broadening formation, right-angled and ascending114%-9%27%17%2953%37/8830%$4.3738
Broadening formation, right-angled and descending50%-12%7%5%10324%16/3830%$5.1128
Broadening wedge, ascending108%-12%37%24%1146%25/3740%$2.5567
Broadening wedge, descending109%-11%15%9%8831%11/4022%$0.9692
Bump-and-run reversal top142%-11%48%23%1277%87/14038%$5.6220
Diamond bottom224%-13%69%112%9/1735%
Diamond top179%-12%53%24%983%35/6834%$4.6534
Adam & Adam double top207%-10%45%25%7110%175/51725%$7.7110
Adam & Eve double top130%-10%32%18%2776%88/20530%$9.736
Eve & Adam double top109%-9%20%12%6881%78/23525%$5.3824
Eve & Eve double top172%-11%40%23%1489%92/23928%$9.137
Falling wedge146%-9%24%16%3633%14/5221%-$2.00114
Head-and-shoulders top145%-10%35%20%1867%288/70329%$6.1117
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank
Head-and-shoulders, complex top116%-11%38%18%2561%54/8738%$3.9944
Rectangle top114%-9%25%14%5146%42/10728%$4.1642
Rising wedge145%-9%33%22%1563%66/17527%$4.3440
Rounding top116%-11%21%10%8251%37/11325%$2.4569
Ascending scallop115%-13%29%16%3531%18/3733%$5.1129
Descending scallop158%-12%28%15%4261%92/29924%$4.0943
Scallop, inverted and ascending82%-10%20%13%5658%10/2132%$4.5836
Scallop, descending and inverted100%-11%8%6%10016%33/15917%$1.1790
Triangle, ascending136%-10%28%19%2062%42/11926%$2.6264
Triangle, descending140%-11%25%14%5032%37/12024%$1.3088
Triangle, symmetrical144%-11%27%17%3250%110/34324%$1.3985
Triple top137%-10%28%17%3372%200/58026%$6.4113
Rectangle bottom124%-12%11%6%9815%14/6917%-$0.11104
3 falling peaks102%-11%12%8%9339%145/55621%$5.4023
Roof56%-9%9%9%9138%13/3328%$2.4668
Roof, inverted63%-11%11%9%9043%23/5430%$3.2054
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank

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Trading Symmetrical 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 symmetrical 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 chart pattern (after buying).

For example, buying a symmetrical triangle with an upward breakout in a bull market and selling a busted broadening bottom shows winning trades making an average of 135%. Losing trades lost 9% giving a net gain of 22%. The annualized gain is 13% in this case, giving the setup a rank of 67 (where 1 is best). If you traded this without a stop, the net gain climbed to 43%. Of the stocks I looked at, I found 149 trades with 21% of them winning. Expectancy was $1.92 per share, ranking 78 where 1 is best.

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 bottom135%-9%22%13%6743%32/11721%$1.9278
Broadening top109%-9%16%11%7763%76/28521%$3.2055
Broadening formation, right-angled and ascending154%-9%21%15%4359%26/11618%$0.6095
Broadening formation, right-angled and descending104%-11%14%10%8342%30/10622%-$0.02101
Broadening wedge, ascending69%-14%-4%-4%11460%7/4813%-$2.06115
Broadening wedge, descending107%-12%19%10%7956%27/7626%$1.4382
Bump-and-run reversal bottom57%-10%5%3%11056%22/7423%$3.0756
Cup with handle15%-9%-5%-5%115-4%11/4918%-$1.19112
Diamond bottom61%-8%7%4%10976%15/5521%$1.4481
Diamond top181%-8%31%15%4192%129/49621%$4.7832
Adam & Adam double bottom132%-5%10%8%94161%6/5011%$6.5912
Adam & Eve double bottom187%-10%23%14%4959%58/28817%$5.7219
Eve & Adam double bottom181%-9%17%10%8199%44/27214%$0.9493
Eve & Eve double bottom88%-10%8%5%10537%45/21118%$5.9918
Falling wedge97%-10%19%13%5763%41/11227%$2.9958
Head-and-shoulders bottom117%-9%24%13%5856%163/46926%$3.3951
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank
Head-and-shoulders complex bottom78%-10%10%6%10223%20/6922%-$0.39108
Rectangle top100%-10%9%7%9663%40/18917%$2.2076
Rising wedge99%-9%13%13%6068%27/10321%$0.0199
Round bottom143%-11%32%37%7/1828%
Rounding top62%-11%11%6%10124%16/3631%$2.1277
Ascending scallop92%-9%17%13%5960%45/12926%$2.5666
Descending scallop93%-10%12%9%8638%17/6521%$1.0491
Scallop, inverted and ascending104%-10%17%12%7066%50/15824%$3.3152
Scallop, descending and inverted50%-8%4%5%10730%18/7320%$1.3986
Triangle, ascending73%-12%7%5%10438%45/15822%-$0.03102
Triangle, descending62%-10%5%4%10842%45/17920%$1.3587
Triangle, symmetrical237%-10%50%33%484%180/56924%$3.4150
Triple bottom268%-9%42%28%594%130/58118%$5.2926
Rectangle bottom107%-11%13%8%9516%27/10620%$3.0557
3 rising valleys106%-8%15%11%7890%91/35720%$4.3439
Roof119%-10%26%19%2174%13/3428%$1.2489
Roof, inverted60%-10%14%9%8438%25/4735%$4.6335
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank

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Trading Symmetrical Triangles: Busted Buy, Busted Sale

Picture of a busted pattern pair.

Table 6 shows the last combination of trading statistics. It shows busted symmetrical triangles 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).

The associated figure shows the setup.

For example, buying a busted symmetrical triangle 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.

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 bottom55%-11%1%1%11313%10/4419%-$0.20105
Broadening top161%-10%29%17%3166%28/9423%$8.698
Broadening formation, right-angled and ascending123%-10%11%7%9738%7/3716%-$1.50113
Broadening formation, right-angled and descending46%-9%2%1%11224%10/4219%-$0.58109
Broadening wedge, ascending105%-14%19%27%5/1328%
Broadening wedge, descending101%-10%28%13%6144%11/2134%$2.2474
Bump-and-run reversal bottom14%-8%-6%8%2/277%
Cup with handle24%-9%-1%-4%5/1525%
Diamond bottom151%-9%-4%2%1/274%
Diamond top71%-10%16%12%6956%14/3131%$5.5721
Adam & Adam double bottom161%-9%29%14%5577%54/18323%$11.142
Adam & Eve double bottom80%-11%8%5%10636%26/10220%$3.2853
Eve & Adam double bottom366%-8%97%45%1124%19/4928%$10.863
Eve & Eve double bottom205%-8%30%16%3758%15/6818%$4.7931
Falling wedge101%-11%22%12%7170%13/3130%$0.5496
Head-and-shoulders complex bottom89%-10%9%57%4/1719%
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank
Rectangle top65%-10%10%9%8764%25/6927%$1.6679
Rising wedge114%-10%43%16%3869%19/2543%$2.2375
Round bottom38%-12%-1%20%3/1121%
Rounding top32%-13%0%22%4/1029%
Ascending scallop101%-11%28%14%5473%20/3834%$7.1311
Descending scallop49%-10%15%6%9929%11/1542%$6.2215
Scallop, inverted and ascending133%-10%50%16%3973%31/4342%$9.955
Scallop, descending and inverted12%-10%-10%40%1/274%
Triangle, ascending93%-12%18%11%7428%18/4529%-$0.88111
Triangle, descending89%-9%16%13%6440%16/4626%$3.8045
Triangle, symmetrical123%-9%18%15%4542%58/22021%$2.5865
Triple bottom130%-10%30%14%5260%71/18328%$10.424
Rectangle bottom143%-10%23%15%4431%12/4421%$6.3614
3 rising valleys194%-10%40%21%1666%34/10524%$11.441
Roof128%-11%0%50%1/128%
Roof, inverted145%-14%26%42%5/1525%
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank

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Trading Symmetrical 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 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 long-term (more than 6 months) duration from the trend start to the pattern's start. When buying busted patterns, use the short-term (0 to 3 months)

Table 7: Short (S) Medium (M) or Long (L) Trend Start and Performance
 Sell Non-Busted PatternSell Busted Pattern
Buy non-busted patternS29% M20% L30%S25% M15% L23%
Buy busted patternS27% M23% L38%S27% M24% L26%

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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).

Buy symmetrical triangles when the breakout price is above the 50-day SMA.

Table 8: Above (A) Below (B) 50-Day Simple Moving Average
 Sell Non-Busted PatternSell Busted Pattern
Buy non-busted patternA28% B27%A25% B17%
Buy busted patternA29% B28%A25% B24%

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 symmetrical triangles when the breakout price is below the 200-day SMA.

Table 9: Above (A) Below (B) 200-Day Simple Moving Average
 Sell Non-Busted PatternSell Busted Pattern
Buy non-busted patternA21% B41%A18% B30%
Buy busted patternA30% B24%A24% B30%

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Selling First Bearish Chart Pattern

The prior discussion assumes you buy an symmetrical 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 symmetrical triangle and sell the first non-busted chart pattern which comes along, you'd make 10% on average. Annualized, you'd make 31%. This compares to a 18% 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. The bottom rows shows buying busted patterns have a higher expectancy of profit.

Table 10: Selling the First Bearish Pattern (Annualized)
 Sell Non-Busted PatternSell Busted Pattern
Buy non-busted pattern10% (31% v 18%)2% (5% v 15%)
Buy busted pattern10% (26% v 17%)2% (6% v 14%)
Expectancy (Below)
 Sell Non-Busted PatternSell Busted Pattern
Buy non-busted pattern$1.47$-0.29
Buy busted pattern$4.55$4.71

-- Thomas Bulkowski

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