Chart Pattern Indicator: What's It Say?…

Monday 10/7/19. Market Monday: The Week Ahead

My Prediction

I show the Dow utilities on the monthly scale.

Why?

Because the utilities as of Friday’s close is the best performing index of the five I follow. It’s up 23.5%. The Nasdaq is up 20.3% and the Dow industrials are up 13.9%.

The kicker is that none of the numbers I just listed include dividends.

I own three or four utility stocks. They yield like 5% each because I bought them years ago and held on. So I’m getting capital gains plus dividends. That’s a potent combination.

If you think the utility index besting the other indices is a one-off, you’re wrong. It happened a few years ago, in 2015. The utilities posted a 26% gain, with dividends that’s more than
double what the Nasdaq posted. The Dow that year was up a paltry 7.5%.

I guess what I’m saying is that you should have a diversified portfolio of stocks so if one sector drops others can take up the slack. That way, you can do well.

A Brief Look Back

The following is a brief review of how the markets performed over time. The numbers refer to the close-to-close move in the Dow industrials.

Monday: Up 96.58 points.

Tuesday: Down 343.79 points.

Wednesday: Down 494.42 points.

Thursday: Up 122.42 points.

Friday: Up 372.68 points.

For the Week…

The Dow industrials were down 246.53 points or 0.9%.

The Nasdaq composite was up 42.84 points or 0.5%.

The S&P 500 index was down 9.78 points or 0.3%.

Year to Date…

Dow Industrials

     3.0% down from the high of 27,398.68 on 07/16/2019.

     17.4% up from the low of 22,638.41 on 01/03/2019.

Nasdaq

     4.3% down from the high of 8,339.64 on 07/26/2019.

     23.6% up from the low of 6,457.13 on 01/03/2019.

S&P 500

     2.5% down from the high of 3,027.98 on 07/26/2019.

     20.8% up from the low of 2,443.96 on 01/03/2019.

Options Expiration

No options expire this week.

Swing and Position Traders: Chart Pattern Indicator

The chart pattern indicator is bullish
with 2 of 3 half triangles showing (). Additional triangles are a measure
of strength with solid triangles meaning a more reliable signal than half triangles.

Swing Traders: Pivot Points

The following is based on an SFO article in December 2004 by John Seekinger, titled, “Take a
two-dimensional approach.” He offers these tips.

• Seekinger doesn’t look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
• S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
• If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
• In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
• A move outside of daily R1 or S1 usually does not mean a breakout.
• The odds suggest that the entire week’s price action will remain between weekly R2 and S2.
• Avoid going long when the market moves above weekly R2 (it’s overbought) and avoid going short when price moves below weekly S2 (oversold).
• Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
• Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

Pivot point: P = (H + L + C)/3

First resistance level: R1 = (2 * P) – L

First support level: S1 = (2 * P) – H)

Second resistance level: R2 = P + (R1 – S1)

Second support level: S2 = P – (R1 – S1)

H = high price , L=low price, C=closing price

Consecutive Price Trends

How long can an index close higher (or lower) each day? The adjacent table shows how often consecutive up or down closes occur in the indices, based on the most recent trend of closes.

Low percentages suggest the market is overdue to turn (think of it as the likelihood that next week or next month will continue the trend, based on historical performance). Values of 50% mean random, so most percentages will be lower.

The analysis uses data going back 10 years for weekly percentages and 25 years for monthly percentages (or the start of data, whichever is more recent). Any unchanged closing price is interpreted as the end of the string of consecutive up or down closes.

Earnings, Chart Patterns & Industries

Earnings season will be starting in about 9 days.

Large numbers of bullish or bearish chart patterns can signal short- to intermediate-term market trends (many bullish chart patterns can mean an uptrend will continue, for example).
However, please realize that the short-term price trend could have changed since the pattern was discovered (this is especially true of pipe tops or bottoms, which are weekly patterns).

The 10 types of most frequently appearing chart patterns in the stocks, indices, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.

The industries I follow were the best (rank 1) and worst performing.

— Thomas Bulkowski

Friday 10/4/19. Pattern Trading Setups for the Weekend.

Go to Table.

You can find setups based on a Fibonacci retrace by clicking on the link.

Click the link for a list of symbols from the table.

The following patterns were found manually, so the results may differ from those found using Patternz.

Mr. Bulkowski has excluded any securities he owns from appearing in the list. However, he may add any of the securities listed to his portfolio at any time, just as you can.

There were 20 patterns found this week (excluding pipe bottoms; pipe tops and bottoms are found looking back 2 weeks) out of 587 stocks searched, or 3.4%. Based on the percentage, the stock market is
trending since few consolidation patterns appear.

Excluding ETFs, there were 1 bullish chart patterns this week and 7 bearish ones with any remaining (12) being undecided.
The ratio of bullish to bearish patterns suggests the market is bearish.

In the table below, the red and green colors are based on the historical breakout direction for the associated chart pattern. If a high and tight flag appears, the start and end dates highlight the flagpole only and not the flag.

More…

— Thomas Bulkowski

Definitions

’Breakout is upward/downward 100% of the time’ means price breaks out up/down by definition, not by statistically measuring the rate.

All numbers assume a bull market and are based on the breakout direction that occurs most often.

Industry: E-Commerce

Industry RS rank: 37 out of 58

Stock RS rank: 44 out of 582

10/3/19 close: $90.90

1 Month avg volatility: $1.93. Volatility stop (for upward breakout): $84.89 or 6.6% below the close.

Change YTD: 48.82%

Volume: 1,727,300 shares.
3 month avg: 2,185,974 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Monday, and best sell day (most up closes) is Thursday.

 

Chart pattern: Triangle, symmetrical continuation pattern from 09/06/2019 to 10/03/2019

Breakout is upward 54% of the time.

Average rise: 31%.

Break-even failure rate: 9%.

Throwbacks occur 37% of the time.

Price hits measure rule target 66% of the time.

Industry: Insurance (Life)

Industry RS rank: 42 out of 58

Stock RS rank: 484 out of 582

10/3/19 close: $22.18

1 Month avg volatility: $0.65. Volatility stop (for downward breakout): $23.80 or 7.3% above the close.

Change YTD: -20.62%

Volume: 336,900 shares.
3 month avg: 625,883 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Wednesday, and best sell day (most up closes) is Thursday.

 

Chart pattern: Double Top, Adam and Adam reversal pattern from 09/13/2019 to 09/27/2019

Breakout is downward 100% of the time.

Average decline: 19%.

Break-even failure rate: 8%.

Pullbacks occur 61% of the time.

Price hits measure rule target 72% of the time.

Industry: Insurance (Diversified)

Industry RS rank: 13 out of 58

Stock RS rank: 159 out of 582

10/3/19 close: $187.24

1 Month avg volatility: $3.34. Volatility stop (for downward breakout): $194.19 or 3.7% above the close.

Change YTD: 28.81%

Volume: 651,900 shares.
3 month avg: 1,174,512 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Wednesday, and best sell day (most up closes) is Thursday.

 

Chart pattern: Head-and-shoulders top reversal pattern from 08/19/2019 to 09/27/2019

Breakout is downward 100% of the time.

Average decline: 22%.

Break-even failure rate: 4%.

Pullbacks occur 50% of the time.

Price hits measure rule target 55% of the time.

Industry: Trucking/Transp. Leasing

Industry RS rank: 10 out of 58

Stock RS rank: 442 out of 582

10/3/19 close: $28.08

1 Month avg volatility: $1.13. Volatility stop (for downward breakout): $30.54 or 8.8% above the close.

Change YTD: -18.04%

Volume: 217,100 shares.
3 month avg: 234,063 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Monday, and best sell day (most up closes) is Thursday.

 

Chart pattern: Double Top, Adam and Eve reversal pattern from 09/13/2019 to 09/27/2019

Breakout is downward 100% of the time.

Average decline: 18%.

Break-even failure rate: 14%.

Pullbacks occur 59% of the time.

Price hits measure rule target 69% of the time.

Industry: Retail (Special Lines)

Industry RS rank: 35 out of 58

Stock RS rank: 394 out of 582

10/3/19 close: $65.66

1 Month avg volatility: $1.70. Volatility stop (for downward breakout): $69.09 or 5.2% above the close.

Change YTD: 23.98%

Volume: 2,118,500 shares.
3 month avg: 4,325,955 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Tuesday, and best sell day (most up closes) is Thursday.

 

Chart pattern: Double Top, Eve and Adam reversal pattern from 09/10/2019 to 10/01/2019

Breakout is downward 100% of the time.

Average decline: 15%.

Break-even failure rate: 13%.

Pullbacks occur 64% of the time.

Price hits measure rule target 72% of the time.

Industry: Electronics

Industry RS rank: 47 out of 58

Stock RS rank: 504 out of 582

10/3/19 close: $6.59

1 Month avg volatility: $0.21. Volatility stop (for downward breakout): $7.29 or 10.6% above the close.

Change YTD: -24.86%

Volume: 252,900 shares.
3 month avg: 557,234 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Thursday, and best sell day (most up closes) is Wednesday.

 

Chart pattern: Double Top, Adam and Adam reversal pattern from 09/16/2019 to 09/27/2019

Breakout is downward 100% of the time.

Average decline: 19%.

Break-even failure rate: 8%.

Pullbacks occur 61% of the time.

Price hits measure rule target 72% of the time.

Industry: Semiconductor

Industry RS rank: 23 out of 58

Stock RS rank: 489 out of 582

10/3/19 close: $48.63

1 Month avg volatility: $1.69. Volatility stop (for downward breakout): $52.23 or 7.4% above the close.

Change YTD: 13.69%

Volume: 1,337,600 shares.
3 month avg: 2,005,123 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Thursday, and best sell day (most up closes) is Tuesday.

 

Chart pattern: Triple top reversal pattern from 09/16/2019 to 10/01/2019

Breakout is downward 100% of the time.

Average decline: 19%.

Break-even failure rate: 10%.

Pullbacks occur 61% of the time.

Price hits measure rule target 40% of the time.

Industry: Machinery

Industry RS rank: 31 out of 58

Stock RS rank: 322 out of 582

10/3/19 close: $154.99

1 Month avg volatility: $3.53. Volatility stop (for downward breakout): $162.10 or 4.6% above the close.

Change YTD: 15.98%

Volume: 1,447,200 shares.
3 month avg: 1,327,631 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Monday, and best sell day (most up closes) is Thursday.

 

Chart pattern: Double Top, Eve and Adam reversal pattern from 09/13/2019 to 10/01/2019

Breakout is downward 100% of the time.

Average decline: 15%.

Break-even failure rate: 13%.

Pullbacks occur 64% of the time.

Price hits measure rule target 72% of the time.

Industry: Machinery

Industry RS rank: 31 out of 58

Stock RS rank: 288 out of 582

10/3/19 close: $94.57

1 Month avg volatility: $1.65. Volatility stop (for downward breakout): $98.01 or 3.6% above the close.

Change YTD: 33.29%

Volume: 675,500 shares.
3 month avg: 1,038,811 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Wednesday, and best sell day (most up closes) is Thursday.

 

Chart pattern: Double Top, Adam and Eve reversal pattern from 09/13/2019 to 09/30/2019

Breakout is downward 100% of the time.

Average decline: 18%.

Break-even failure rate: 14%.

Pullbacks occur 59% of the time.

Price hits measure rule target 69% of the time.

Industry: Oilfield Svcs/Equipment

Industry RS rank: 57 out of 58

Stock RS rank: 184 out of 582

10/3/19 close: $48.33

1 Month avg volatility: $2.02. Volatility stop (for downward breakout): $52.46 or 8.6% above the close.

Change YTD: 60.94%

Volume: 157,100 shares.
3 month avg: 557,835 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Monday, and best sell day (most up closes) is Tuesday.

 

Chart pattern: Pipe top reversal pattern from 09/16/2019 to 09/23/2019

Breakout is downward 100% of the time.

Average decline: 20%.

Break-even failure rate: 11%.

Pullbacks occur 41% of the time.

Price hits measure rule target 70% of the time.

Industry: Chemical (Diversified)

Industry RS rank: 36 out of 58

Stock RS rank: 434 out of 582

10/3/19 close: $70.82

1 Month avg volatility: $1.93. Volatility stop (for downward breakout): $74.69 or 5.5% above the close.

Change YTD: -3.13%

Volume: 790,000 shares.
3 month avg: 1,209,300 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Monday, and best sell day (most up closes) is Friday.

 

Chart pattern: Double Top, Adam and Adam reversal pattern from 09/13/2019 to 10/01/2019

Breakout is downward 100% of the time.

Average decline: 19%.

Break-even failure rate: 8%.

Pullbacks occur 61% of the time.

Price hits measure rule target 72% of the time.

Industry: Internet

Industry RS rank: 32 out of 58

Stock RS rank: 493 out of 582

10/3/19 close: $132.84

1 Month avg volatility: $3.36. Volatility stop (for downward breakout): $140.19 or 5.5% above the close.

Change YTD: -18.02%

Volume: 695,200 shares.
3 month avg: 847,706 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Friday, and best sell day (most up closes) is Wednesday.

 

Chart pattern: Double Top, Eve and Eve reversal pattern from 09/12/2019 to 10/01/2019

Breakout is downward 100% of the time.

Average decline: 18%.

Break-even failure rate: 11%.

Pullbacks occur 59% of the time.

Price hits measure rule target 73% of the time.

Industry: Electronics

Industry RS rank: 47 out of 58

Stock RS rank: 557 out of 582

10/3/19 close: $4.16

1 Month avg volatility: $0.26. Volatility stop (for downward breakout): $4.81 or 15.7% above the close.

Change YTD: -2.00%

Volume: 30,335,300 shares.
3 month avg: 5,624,629 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Thursday, and best sell day (most up closes) is Tuesday.

 

Chart pattern: Dead-cat bounce continuation pattern from 10/03/2019 to 10/03/2019

Breakout is downward 67% of the time.

Average decline: 18%.

Industry: Biotechnology

Industry RS rank: 46 out of 58

Stock RS rank: 366 out of 582

10/3/19 close: $297.00

1 Month avg volatility: $7.70. Volatility stop (for downward breakout): $312.41 or 5.2% above the close.

Change YTD: -0.98%

Volume: 835,600 shares.
3 month avg: 759,071 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Tuesday, and best sell day (most up closes) is Wednesday.

 

Chart pattern: Double Top, Adam and Adam reversal pattern from 09/20/2019 to 10/01/2019

Breakout is downward 100% of the time.

Average decline: 19%.

Break-even failure rate: 8%.

Pullbacks occur 61% of the time.

Price hits measure rule target 72% of the time.

Industry: Advertising

Industry RS rank: 22 out of 58

Stock RS rank: 304 out of 582

10/3/19 close: $20.50

1 Month avg volatility: $0.42. Volatility stop (for downward breakout): $21.40 or 4.4% above the close.

Change YTD: -0.63%

Volume: 1,927,000 shares.
3 month avg: 6,516,800 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Wednesday, and best sell day (most up closes) is Friday.

 

Chart pattern: Double Top, Adam and Adam reversal pattern from 09/11/2019 to 10/01/2019

Breakout is downward 100% of the time.

Average decline: 19%.

Break-even failure rate: 8%.

Pullbacks occur 61% of the time.

Price hits measure rule target 72% of the time.

Industry: Human Resources

Industry RS rank: 54 out of 58

Stock RS rank: 499 out of 582

10/3/19 close: $52.76

1 Month avg volatility: $1.32. Volatility stop (for downward breakout): $56.71 or 7.5% above the close.

Change YTD: -7.76%

Volume: 1,383,500 shares.
3 month avg: 1,012,069 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Wednesday, and best sell day (most up closes) is Friday.

 

Chart pattern: Double Top, Eve and Adam reversal pattern from 09/13/2019 to 10/01/2019

Breakout is downward 100% of the time.

Average decline: 15%.

Break-even failure rate: 13%.

Pullbacks occur 64% of the time.

Price hits measure rule target 72% of the time.

Industry: Diversified Co.

Industry RS rank: 45 out of 58

Stock RS rank: 446 out of 582

10/3/19 close: $158.37

1 Month avg volatility: $3.96. Volatility stop (for downward breakout): $166.39 or 5.1% above the close.

Change YTD: 5.24%

Volume: 921,000 shares.
3 month avg: 805,498 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Monday, and best sell day (most up closes) is Friday.

 

Chart pattern: Double Top, Adam and Adam reversal pattern from 09/13/2019 to 10/01/2019

Breakout is downward 100% of the time.

Average decline: 19%.

Break-even failure rate: 8%.

Pullbacks occur 61% of the time.

Price hits measure rule target 72% of the time.

Industry: Securities Brokerage

Industry RS rank: 52 out of 58

Stock RS rank: 554 out of 582

10/3/19 close: $32.85

1 Month avg volatility: $1.26. Volatility stop (for downward breakout): $36.20 or 10.2% above the close.

Change YTD: -32.90%

Volume: 15,533,700 shares.
3 month avg: 2,043,012 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Monday, and best sell day (most up closes) is Thursday.

 

Chart pattern: Dead-cat bounce continuation pattern from 10/01/2019 to 10/01/2019

Breakout is downward 67% of the time.

Average decline: 18%.

Industry: Insurance (Diversified)

Industry RS rank: 13 out of 58

Stock RS rank: 501 out of 582

10/3/19 close: $26.61

1 Month avg volatility: $0.76. Volatility stop (for downward breakout): $28.40 or 6.7% above the close.

Change YTD: -9.43%

Volume: 2,476,500 shares.
3 month avg: 1,168,134 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Wednesday, and best sell day (most up closes) is Thursday.

 

Chart pattern: Triple top reversal pattern from 09/13/2019 to 10/01/2019

Breakout is downward 100% of the time.

Average decline: 19%.

Break-even failure rate: 10%.

Pullbacks occur 61% of the time.

Price hits measure rule target 40% of the time.

Industry: Retail Building Supply

Industry RS rank: 19 out of 58

Stock RS rank: 141 out of 582

10/3/19 close: $160.28

1 Month avg volatility: $3.15. Volatility stop (for downward breakout): $168.49 or 5.1% above the close.

Change YTD: 15.19%

Volume: 132,600 shares.
3 month avg: 222,320 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Monday, and best sell day (most up closes) is Thursday.

 

Chart pattern: Double Top, Eve and Adam reversal pattern from 09/13/2019 to 10/01/2019

Breakout is downward 100% of the time.

Average decline: 15%.

Break-even failure rate: 13%.

Pullbacks occur 64% of the time.

Price hits measure rule target 72% of the time.

Thursday 10/3/19. Intraday Market Direction: Nasdaq

Weekly, since inception on 6/14/2011:

     The prediction of the index closing higher has been right 173/313 or 55.3% of the time.

     The prediction of the index closing lower has been right 53/105 or 50.5% of the time.

Since I post this the night before, check how the futures are trading before market open. Large moves can affect the opening direction.

$ $ $

I show a picture of the Nasdaq composite on the 5-minute scale.

The long red line shows how the index has been dropping over the last 10 days. The movement has been up and down each day, but the downward trend overall is obvious.

Today (Wednesday), the index formed a descending scallop. I show that outlined with a curving red line. Price gapped open lower and formed a cup.

What’s next? The above probability says the index will close higher. That’s possible, of course. A snapback rise. However, 66% of descending scallops breakout downward.

A downward breakout occurs when price closes below the bottom of the pattern. So it’s possible that sometime during the trading day on Thursday, we’ll see the index close below
the scallop and recover to end the day higher.

$ $ $

The following table shows where Fibonacci retrace values of the day’s high-low range are plus pivot points, calculated on the Nasdaq composite, sorted by value. When several are near each other (small differences),
the area might act as support or resistance.

— Thomas Bulkowski

Wednesday 10/2/19. A Look At Indicators

This is a picture of the chart pattern indicator on the daily scale. The indicator is the line chart below a chart of the S&P 500 composite.

The vertical red bar on the far right of the chart says the bearish signal is still in place.

And I had just indicated I thought the market would turn bullish (Tom’s Targets, at page top). But my turn signals are typically three days ahead of time. Don’t ask me why because I don’t know. And I could be
wrong altogether.

Still, we have a bearish red bar on the chart. And that signal is old enough that it might be permanent (signals can change for up to a week).

The red line is the percentage of stocks at least 20% below their 1-year high (plotted upside down). The blue line is the average percentage drop of stocks below their 1-year high (plotted upside down).

Both lines this week are more bearish than they were a week ago, snapshot to snapshot.

Not good.

Coupled with the prior chart, things are still looking bearish. Not ‘trend change’ bearish, but not positive either. I’d advise caution here. It could be we’re about to start another downleg
with the index dropping for about a week followed by a return to the corrective phase of a measure move down.

— Thomas Bulkowski

Tuesday 10/1/19. Quarterly Prediction Update

Here’s a three-slide slideshow, updating the 2019 forecast.

— Thomas Bulkowski