![]() ![]() ![]() I used the following 43 chart patterns in the analysis, but some only applied if they were busted. Sales happened when price dropped a penny below the bottom of the bearish chart pattern (or busted bullish one) or the opening price if the stock gapped open lower. If price dropped into aīear market while in the trade, that was fine. If the breakout from the wedge was in a bear market, I excluded the trade because I only wanted bull market results. The first chart pattern appeared in July 1991 and the last in April 2019, giving me 11,592 trades. Sell signal: Downward breakouts from various bearish chart patterns (or busted bullish patterns) provided the sell signal.The stop was not raised, but I did test trailing stops separately. Stop loss: A penny below the bottom of the wedge served as the stop price.This works for both busted and no-busted wedges. Entry: Place a buy stop a penny above the top of the chart pattern.Ascending broadening wedges provided the buy signal.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. So buying an upward breakout from a broadening bottom and selling at the double top I cataloged would be different than choosing to sell a different double top. There may be plenty of double tops over the years, for example, that I didn't catalog on the way to the one The databases I built over several decades doesn't identify every chart pattern. Trading Ascending Broadening Wedges: Entry and Exit Conditions Table 10: If you sell the first bearish pattern which appears, stick to selling non-busted ones.Table 10: Do not sell the first bearish chart pattern which appears.Table 8: Buy wedges above either the 50- or 200-day simple moving average.Table 7: Buy busted wedges with a short-term (0 to 3 months) inbound price trend.Table 7: Buy non-busted wedges with a medium- to long-term (more than 3 months) inbound price trend (from trend start to pattern's start).Trading using a busted chart pattern results in better performance than using non-busted patterns (at least for wedges as the buy signal). Buy a non-busted ascending broadening wedge and sell a busted broadening formation, right-angled and ascending ($6.52) Buy a busted ascending broadening wedge and sell a Adam & Adam double top ($6.85) Buy a busted ascending broadening wedge and sell a broadening formation, right-angled and ascending ($7.25) ![]() Buy a busted ascending broadening wedge and sell an inverted roof ($8.64) Buy a busted ascending broadening wedge and sell a busted Adam & Adam double bottom ($10.97) I put the expected profit per trade, per share, in parenthesis. Trades and how much money you might make trading a pattern pair. Expectancy is a way of gauging winning and losing The following list shows the expected performance of chart pattern pairs, ranked by their expectancy. Non-busted descending and inverted scallop (65%) Non-busted ascending broadening wedge (73%) ![]() Busted symmetrical triangle (average annual gain of 98%) 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).īuy a busted ascending broadening wedge and sell a. 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. This articles assumes you buy either an upward breakout from an ascending broadening wedge (ABW) or a busted wedge (price breaks out downward, drops no more than 10%, reverses, and closes above the top of the wedge). The figure illustrates the idea for trading pattern pairs, where price is the red line and the boxes are chart patterns. Trading Ascending Broadening Wedges: Summaryīefore I continue, when I refer to a wedge in this article, I'm referring to an ascending broadening wedge. Results: Non-Busted Buy, Non-Busted Sale.Along the way, you give price a chance to rise far enough to overcome those trades which are The broadening bottom, hold for a few years, and sell when a double top appears and breaks out downward. 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). Bulkowski on Pattern Pairs: Ascending Broadening Wedges ![]()
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