Chart Pattern Indicator: What's It Say?…

Monday 1/9/23. Market Monday: The Week Ahead

My Prediction

I completed new research on “serious” bear markets (drops of 30% or more) and found that stocks take that size hit once every 2 years, ETFs do it once every 3 years, and mutual funds once every 7.5 years. Read the article (link) for more information.

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I looked back at a post 3 weeks ago and found that my prediction was right about the Dow turning up at support. I got one right!

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I show the Nasdaq on the daily scale in the chart.

The red lines encompass a chart pattern called a broadening top. Notice how price enters the pattern with a strong upward run, from A. The index forms the broadening top as it decides
which direction to move, and with a downward breakout, it returns the index back to the launch price (A).

This move (a return to the launch price, or A = B) is unusual for two reasons.

First, it rarely works, but when it does, it provides a handy target to plan a move.

Second, when it does work, price often stops the decline to B above the low posted at the launch price, A. In other words B > A (but not by much).

This strength suggests the index will rise in the coming week…at least that’s my guess.

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.

Tuesday: Down 10.88 points.

Wednesday: Up 133.4 points.

Thursday: Down 339.69 points.

Friday: Up 700.53 points.

Saturday: Holiday or other weird event!

For the Week…

The Dow industrials were up 483.36 points or 1.5%.

The Nasdaq composite was up 102.81 points or 1.0%.

The S&P 500 index was up 55.58 points or 1.4%.

Year to Date…

Dow Industrials

     0.2% down from the high of 33,710.66 on 01/06/2023.

     2.5% up from the low of 32,812.33 on 01/05/2023.

Nasdaq

     0.4% down from the high of 10,613.06 on 01/03/2023.

     3.0% up from the low of 10,265.04 on 01/06/2023.

S&P 500

     0.3% down from the high of 3,906.19 on 01/06/2023.

     2.7% up from the low of 3,794.33 on 01/03/2023.

Options Expiration

No options expire this week.

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

Earnings, Chart Patterns & Industries

Earnings season will be starting in about 7 days.

Here’s a symbol list of 173 chart and candlestick patterns (13 “investment grade” candle patterns) found in today’s securities using my version of Patternz:
ATSG, AMZN, AMGN, APH, ANIK, APOG, ATR, ACGL, ATO, ADSK, ADP, AVNT, BCPC, BBBY, BERY, BBY, BIO, BAH, BSX, BRC, BLDR, CACI, CE, CX, CNP, CENX, CINF, CLF, CLX, CNA, CNO, CTSH, GLW, COST, CR, CTS, CMI, DHR, ^DJU, ^DJT, DRQ, EXP, EMN, ECL, EL, FLS, FORM, FCX, FRD, GIS, GPN, GL, GES, THG, HSC, HIG, HAYN, HL, HP, DHI, HWM, HUN, ITW, ILMN, INCY, INFN, INTC, IPG, IVC, JBLU, KBH, KMT, KBAL, KSS, LAMR, LMT, L, MAN, MTRN, MDC, MRK, MGEE, MLI, NWL, NEU, JWN, NOC, NUS, ORI, OMC, ON, PKG, PATK, PNW, PPG, PGR, RL, RJF, RGS, RGA, RNG, RLI, ROST, SEE, SMTC, SKX, SCCO, SR, SUM, SRDX, TGT, TXT, TOL, TDG, TRV, TG, TREX, SLCA, UNM, V, WMT, WAT, WERN, WSM, WDAY, ZBRA, ITA, IYM, IYK, IDU, FTEC, FXI, IYZ, EWO, EWK, EWZ, EEM, EIS, EWS, EWY, EWP, EWL, EWT, THD, PPA, DBA, PEJ, PXJ, IXN, ILF, MXI, XLY, XLP, XLF, XLI, XLB, XAR, XLK, VIS, VAW, MGK. Clink this link for details (pattern type, start and end dates).

For a list of small patterns (those a few days wide) click this link.

The below industries were the best (rank 1) or worst performing of those I follow.

— Thomas Bulkowski

Friday 1/6/23. Pattern Trading Setups for the Weekend.

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Here’s a symbol list of 99 chart and candlestick patterns (13 “investment grade” candle patterns) found in today’s securities using my version of Patternz:
AXDX, ADTN, AEIS, AMZN, ABC, AMN, ANIK, ATR, AIZ, ATO, AVA, BCPC, BALL, BBBY, BAH, CE, CLS, CX, CSCO, CMCO, CMTL, CONN, COP, GLW, CCK, CTS, CMI, EVH, FFIV, FDS, FLS, FORM, FDP, GIS, GL, GOOGL, HSII, DHI, HUBG, ILMN, INCY, INTC, IPI, K, KELYA, KSS, LXU, MRTN, MTRX, MDC, MRK, MGEE, MSFT, MLKN, MOS, NXGN, NWPX, OGE, OMCL, PATK, PFE, PLXS, RGS, RGA, RES, SRDX, TJX, TG, TREX, WRB, WSC, WDAY, IYK, IYE, IDU, FXL, FXI, ICF, EWJ, EWS, TUR, DBA, UNG. Clink this link for details (pattern type, start and end dates).

For a list of small patterns (those a few days wide) click this link.

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

The following patterns were found manually, not 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.

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.

For details about the chart patterns, click here.

— Thomas Bulkowski

Thursday 1/5/23. Intraday Market Direction: Nasdaq

Weekly, since inception on 6/14/2011:

     The prediction of the Nasdaq closing higher has been right 248/440 or 56.4% of the time.

     The prediction of the Nasdaq closing lower has been right 69/143 or 48.3% 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.

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

What struck me first is the near horizontal move of the index. I drew a horizontal red line to highlight this.

Below that is a complex head-and-shoulders bottom. I highlight the chart pattern by showing the left shoulder (LS), shoulders 1, 2, and 3, mirroring 2, 1, and RS (right shoulder)
on the right side of the dual head.

All of this suggests the index will rise in the coming days. First, though, we have to see the index close above the horizontal red line. If that happens, then it’ll confirm the chart pattern.

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Here’s a symbol list of 158 chart and candlestick patterns (13 “investment grade” candle patterns) found in today’s securities using my version of Patternz:
MMM, ABT, ANF, ACIW, AEIS, AES, ALB, AMZN, AXP, ABC, ANIK, ATR, ASH, ADSK, AVA, BSET, BMRN, BKNG, BSX, BMY, BG, CLS, CX, CSCO, CNO, CMTL, CONN, COST, CRH, CCK, CMI, XRAY, DFS, DSGR, D, DUK, EL, RE, EVRG, EVH, FFIV, FLS, FDP, GE, GNW, GES, HSIC, HNI, HON, HWM, HUBG, HUN, ILMN, INCY, IIIN, INTC, IPI, ISRG, IVC, JNJ, KBH, K, KSS, LEN, L, LOW, M, MRO, MLM, MAS, MSFT, MCO, NCR, NWL, NEU, NKE, ORI, OLN, OMCL, OTEX, OXM, PATK, PYPL, PFE, PINC, PGR, PEG, KWR, QCOM, RGS, RCKY, SAIA, CRM, NOW, SKX, SWX, SR, SSYS, TFX, TEVA, TXN, TSCO, TZOO, TG, TREX, SLCA, VEEV, V, VMC, WRB, WSM, WSC, WDAY, QTEC, FXL, FXI, BOTZ, IYH, IYZ, SOXX, IEO, IHI, EWK, EWZ, ECH, EWQ, EWG, EWH, EWI, EWS, EZA, EWP, EWL, PPA, IEV, XHB, SMH, VHT. Clink this link for details (pattern type, start and end dates).

For a list of small patterns (those a few days wide) click this link.

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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 1/4/23. 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 chart shows a transition from neutral to bullish and back to neutral. The signals can change for up to a week. Often they will change after the index makes a big move and kicks stocks to begin trending.

To me, this looks like the index is going to move higher in the coming days. Even though the signal is neutral, I remain bullish for the short term.

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).

The red line is worse off than it was a week ago. The blue line, the less volatile of the two lines, shows no change.

Both lines appear to be moving sideways. Although the downtrend can continue and it might look like a measured move down, to me it shows strength.

Look back in June where we see the inverted image of what we see this past week. There, we see price rise, go horizontal and then drop. I expect the same now (except inverted). A down move, a horizontal move
(both of which are in place), followed by a rise. Call this the January effect.

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Here’s a symbol list of 139 chart and candlestick patterns (13 “investment grade” candle patterns) found in today’s securities using my version of Patternz:
ABT, ANF, AXDX, AES, AFL, ALK, ALB, ALL, AEE, AEL, AFG, ABC, APOG, AAPL, AWI, AGO, AVNT, AVA, BBBY, BA, BSX, BG, CBT, CDNS, CLS, CNC, CLNE, CMTL, COST, CCK, DECK, XRAY, EBAY, EFX, EQT, EL, EVH, FICO, FTNT, FRD, GME, GNW, GFS, GFF, HL, HUBG, INFN, PODD, IPG, IPI, IVC, JAZZ, KBH, KFRC, KSS, KLIC, LAMR, LANC, L, MTSI, M, MRO, MCHX, MRTN, META, NCR, NEE, NKE, JWN, NOC, NWPX, NVDA, OMC, OTEX, OUT, OMI, OXM, PANW, PYPL, PINC, KWR, QCOM, RMBS, REGN, RGS, RCKY, CRM, SCHW, SMTC, SCCO, LUV, TPR, TGT, TDOC, TXN, TKR, TSCO, VEEV, VRSN, WLK, WSC, WOLF, FXI, EWA, EWO, EWK, EWZ, EWG, EWI, EWW, EZA, EWD, EWL, THD, TUR, IBB, SSO, GLD, XLB, XLK, UNG, VHT. Clink this link for details (pattern type, start and end dates).

For a list of small patterns (those a few days wide) click this link.

— Thomas Bulkowski

Tuesday 1/3/23. 2023 Forecast

Weekly, since inception on 6/14/2011:

     The prediction of the Dow closing higher has been right 257/459 or 56.0% of the time.

     The prediction of the Dow closing lower has been right 50/105 or 47.6% of the time.

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Here’s the updated 2023 forecast, presented in slider format.

Based on sector performance from Fidelity, the best performing sectors for year-to-date performance as of 12/29/2022 were…
(The numbering is how they ranked a month ago.)

1. Energy (+58%)

3. Utilities (-0%)

2. Consumer staples (-3%)

4. Health care (-3%)

5. Industrials (-7%)

6. Financials (-12%)

7. Materials (-13%)

9. Real estate (-28%)

8. Information technology (-29%)

10. Consumer discretionary (-37%)

11. Communication services (-40%)

The folks at two firms polled by Fidelity weigh the sectors in this order, as of 12/23/22.

1. Information technology (IT)

2. Health care

3. Financials

4. Consumer discretionary

5. Industrials

6. Communication services

7. Consumer staples

8. Energy

9. Utilities

10. Materials

11. Real estate

Here’s how they rank the industries, but only the top 10 appear. One-year change, as of 12/29/22. The numbering is how they ranked a month ago.

2. Energy equipment and services (+59%)

1. Oil, gas and consumable fuels (+56%)

5. Construction and engineering (+25%)

6. Independent power and renewable elec producers (+21%)

8. Aerospace & Defense (+15%)

9. Biotechnology (+14%)

7. Food products (+11%)

3. Gas utilities (+11%)

New. Insurance (+9%)

4. Health care providers and services (+7%)

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Here’s a symbol list of 56 chart and candlestick patterns (13 “investment grade” candle patterns) found in today’s securities using my version of Patternz:
ANF, AXDX, APD, AEE, AEO, AFG, AVA, CBT, CAL, CENX, CLF, CNO, CMCO, ED, CAG, DRQ, DUK, EIX, EVH, GPS, GE, HE, HL, HSII, HELE, HUBG, INCY, IIIN, ITGR, IPAR, IBKR, KMB, LOW, NOC, OXM, PINC, PEG, RL, RGS, SCHW, SXI, SCS, WSC, IYM, EWZ, ECH, THD, PBE, PXJ, ILF, MXI. Clink this link for details (pattern type, start and end dates).

For a list of small patterns (those a few days wide) click this link.

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

— Thomas Bulkowski