Chart Pattern Indicator: What's It Say?…

Monday 8/7/17. Market Monday: The Week Ahead

My Prediction

I show the Dow utilities on the daily scale.

A double top appears at AB. This confirms as a valid double top when price closes below the valley between the two peaks.

I show that with horizontal line D.

A pullback swings price higher than I expected, to reach C.

If the index were to drop and close below the July valley, it would form a triple top pattern. Obviously, the index can continue rising, but I’m not so sure it will. I expect it to
stall first at the old peaks (AB, meaning in the next few days), and then continue up.

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 60.81 points.

Tuesday: Up 72.8 points.

Wednesday: Up 52.32 points.

Thursday: Up 9.86 points.

Friday: Up 66.71 points.

For the Week…

The Dow industrials were up 262.5 points or 1.2%.

The Nasdaq composite was down 23.12 points or 0.4%.

The S&P 500 index was up 4.73 points or 0.2%.

Year to Date…

Dow Industrials

     0.0% down from the high of 22,092.81 on 08/04/2017.

     12.3% up from the low of 19,677.94 on 01/19/2017.

Nasdaq

     1.7% down from the high of 6,460.84 on 07/27/2017.

     17.7% up from the low of 5,397.99 on 01/03/2017.

S&P 500

     0.3% down from the high of 2,484.04 on 07/27/2017.

     10.3% up from the low of 2,245.13 on 01/03/2017.

Options Expiration

No options expire this week.

Swing and Position Traders: Chart Pattern Indicator

As of 08/04/2017, the CPI had:

9 bearish patterns,

24 bullish patterns,

315 patterns waiting for breakout.

The CPI signal is 72.7%, which is
bullish (>= 65%).

The chart pattern indicator is bullish
with 1 of 3 full 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 is either underway or should be starting soon. The sessions could be more volatile.

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

Saturday 8/5/17. Patternz Released

I released version 6.1 of Patternz, my free pattern finding software.

This version has a scoring system which helps you select better performing chart patterns, and another form for stock splits and dividends. If you haven’t upgraded, now’s the time.

— Thomas Bulkowski

Friday 8/4/17. 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.

There were 19 patterns found this week (excluding pipe bottoms; pipe tops and bottoms are found looking back 2 weeks) out of 601 stocks searched, or 3.2%. Based on the percentage, the stock market is
trending since few consolidation patterns appear.

I found 1 pipe bottom chart patterns, which is neutral. High numbers of pipe bottoms can signal a bullish move (I see many of them just before a bear market ends or during a bear market rally. Often it means the first bottom of a double bottom has formed. Thus, expect a move down to the second bottom).

Excluding ETFs, there were 11 bullish chart patterns this week and 6 bearish ones with any remaining (2) being undecided.
The ratio of bullish to bearish patterns suggests the market is hinting of a coming bullish (up) turn.

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: Electronics

Industry RS rank: 18 out of 56

Stock RS rank: 529 out of 593

8/3/17 close: $13.39

1 Month avg volatility: $0.73. Volatility stop (for downward breakout): $17.17 or 28.2% above the close.

Change YTD: 0.75%

Volume: 13,290,700 shares.
3 month avg: 3,245,220 shares.

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

 

Chart pattern: Dead-cat bounce continuation pattern from 08/03/2017 to 08/03/2017

Breakout is downward 67% of the time.

Average decline: 18%.

Industry: Apparel

Industry RS rank: 48 out of 56

Stock RS rank: 540 out of 593

8/3/17 close: $11.65

1 Month avg volatility: $0.36. Volatility stop (for upward breakout): $10.78 or 7.5% below the close.

Change YTD: -23.20%

Volume: 2,022,700 shares.
3 month avg: 4,611,135 shares.

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

 

Chart pattern: Triangle, symmetrical continuation pattern from 07/03/2017 to 08/03/2017

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: Petroleum (Producing)

Industry RS rank: 55 out of 56

Stock RS rank: 574 out of 593

8/3/17 close: $7.89

1 Month avg volatility: $0.47. Volatility stop (for upward breakout): $6.68 or 15.3% below the close.

Change YTD: -39.91%

Volume: 9,470,100 shares.
3 month avg: 6,067,892 shares.

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

 

Chart pattern: Triangle, symmetrical continuation pattern from 06/27/2017 to 08/03/2017

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: Homebuilding

Industry RS rank: 5 out of 56

Stock RS rank: 284 out of 593

8/3/17 close: $15.32

1 Month avg volatility: $0.42. Volatility stop (for upward breakout): $13.90 or 9.2% below the close.

Change YTD: 15.19%

Volume: 535,200 shares.
3 month avg: 512,549 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: Rectangle top continuation pattern from 06/28/2017 to 08/01/2017

Breakout is upward 68% of the time.

Average rise: 39%.

Break-even failure rate: 9%.

Throwbacks occur 64% of the time.

Price hits measure rule target 80% of the time.

Industry: Shoe

Industry RS rank: 30 out of 56

Stock RS rank: 535 out of 593

8/3/17 close: $8.55

1 Month avg volatility: $0.48. Volatility stop (for upward breakout): $7.29 or 14.7% below the close.

Change YTD: -31.71%

Volume: 631,100 shares.
3 month avg: 427,455 shares.

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

 

Chart pattern: Horn bottom reversal pattern from 07/10/2017 to 07/24/2017

WARNING: A dead-cat bounce occurred on 06/02/2017. There is a 26% chance that a 15% or higher decline will occur (or has occurred since then) by 09/01/2017 and a 38% chance by 12/01/2017.

Breakout is upward 100% of the time.

Average rise: 35%.

Break-even failure rate: 9%.

Throwbacks occur 29% of the time.

Price hits measure rule target 76% of the time.

Industry: Semiconductor Cap Equip.

Industry RS rank: 9 out of 56

Stock RS rank: 48 out of 593

8/3/17 close: $22.72

1 Month avg volatility: $0.76. Volatility stop (for downward breakout): $25.90 or 14.0% above the close.

Change YTD: 33.10%

Volume: 1,129,900 shares.
3 month avg: 728,895 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: Pipe top reversal pattern from 07/17/2017 to 07/24/2017

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: Food Processing

Industry RS rank: 47 out of 56

Stock RS rank: 484 out of 593

8/3/17 close: $37.60

1 Month avg volatility: $1.07. Volatility stop (for upward breakout): $35.42 or 5.8% below the close.

Change YTD: -14.89%

Volume: 170,500 shares.
3 month avg: 334,226 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: Pennant continuation pattern from 07/28/2017 to 08/03/2017

Breakout is upward 61% of the time.

Average rise: 25%.

Break-even failure rate: 2%.

Throwbacks occur 47% of the time.

Price hits measure rule target 60% of the time.

Industry: Shoe

Industry RS rank: 30 out of 56

Stock RS rank: 511 out of 593

8/3/17 close: $26.18

1 Month avg volatility: $0.83. Volatility stop (for upward breakout): $24.43 or 6.7% below the close.

Change YTD: -20.23%

Volume: 150,700 shares.
3 month avg: 310,035 shares.

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

 

Chart pattern: Triangle, symmetrical continuation pattern from 04/26/2017 to 08/03/2017

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: Metals and Mining (Div.)

Industry RS rank: 36 out of 56

Stock RS rank: 505 out of 593

8/3/17 close: $13.33

1 Month avg volatility: $0.82. Volatility stop (for downward breakout): $16.67 or 25.1% above the close.

Change YTD: 55.72%

Volume: 12,744,200 shares.
3 month avg: 2,343,451 shares.

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

 

Chart pattern: Dead-cat bounce continuation pattern from 08/03/2017 to 08/03/2017

Breakout is downward 67% of the time.

Average decline: 18%.

Industry: Air Transport

Industry RS rank: 29 out of 56

Stock RS rank: 186 out of 593

8/3/17 close: $59.56

1 Month avg volatility: $0.74. Volatility stop (for downward breakout): $61.08 or 2.6% above the close.

Change YTD: 12.46%

Volume: 856,200 shares.
3 month avg: 1,192,866 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: Diamond top reversal pattern from 07/19/2017 to 08/02/2017

Breakout is downward 69% of the time.

Average decline: 21%.

Break-even failure rate: 6%.

Pullbacks occur 57% of the time.

Price hits measure rule target 76% of the time.

Industry: Electronics

Industry RS rank: 18 out of 56

Stock RS rank: 538 out of 593

8/3/17 close: $8.26

1 Month avg volatility: $0.24. Volatility stop (for downward breakout): $8.85 or 7.2% above the close.

Change YTD: -5.17%

Volume: 5,557,900 shares.
3 month avg: 2,191,997 shares.

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

 

Chart pattern: Rectangle bottom continuation pattern from 06/27/2017 to 08/03/2017

Breakout is downward 55% of the time.

Average decline: 14%.

Break-even failure rate: 16%.

Pullbacks occur 69% of the time.

Price hits measure rule target 50% of the time.

Industry: Advertising

Industry RS rank: 46 out of 56

Stock RS rank: 580 out of 593

8/3/17 close: $0.93

1 Month avg volatility: $0.06. Volatility stop (for downward breakout): $1.09 or 16.8% above the close.

Change YTD: -38.41%

Volume: 53,400 shares.
3 month avg: 116,868 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: Rectangle bottom continuation pattern from 06/20/2017 to 08/03/2017

Breakout is downward 55% of the time.

Average decline: 14%.

Break-even failure rate: 16%.

Pullbacks occur 69% of the time.

Price hits measure rule target 50% of the time.

Industry: Chemical (Diversified)

Industry RS rank: 33 out of 56

Stock RS rank: 5 out of 593

8/3/17 close: $3.49

1 Month avg volatility: $0.22. Volatility stop (for upward breakout): $3.01 or 13.8% below the close.

Change YTD: 67.79%

Volume: 5,104,900 shares.
3 month avg: 1,794,762 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: Flag, high and tight continuation pattern from 06/21/2017 to 08/03/2017

Breakout is upward 100% of the time.

Average rise: 69%.

Throwbacks occur 54% of the time.

Price hits measure rule target 90% of the time.

Industry: Retail Building Supply

Industry RS rank: 44 out of 56

Stock RS rank: 288 out of 593

8/3/17 close: $77.91

1 Month avg volatility: $1.24. Volatility stop (for upward breakout): $75.39 or 3.2% below the close.

Change YTD: 9.55%

Volume: 3,203,000 shares.
3 month avg: 6,018,269 shares.

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

 

Chart pattern: Pipe bottom reversal pattern from 07/17/2017 to 07/24/2017

Breakout is upward 100% of the time.

Average rise: 45%.

Break-even failure rate: 5%.

Throwbacks occur 44% of the time.

Price hits measure rule target 83% of the time.

Industry: Advertising

Industry RS rank: 46 out of 56

Stock RS rank: 293 out of 593

8/3/17 close: $2.93

1 Month avg volatility: $0.09. Volatility stop (for upward breakout): $2.71 or 7.6% below the close.

Change YTD: 10.57%

Volume: 172,300 shares.
3 month avg: 169,423 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: Rectangle top continuation pattern from 05/10/2017 to 08/03/2017

Breakout is upward 68% of the time.

Average rise: 39%.

Break-even failure rate: 9%.

Throwbacks occur 64% of the time.

Price hits measure rule target 80% of the time.

Industry: Drug

Industry RS rank: 31 out of 56

Stock RS rank: 567 out of 593

8/3/17 close: $23.75

1 Month avg volatility: $0.91. Volatility stop (for downward breakout): $28.20 or 18.7% above the close.

Change YTD: -34.48%

Volume: 106,479,500 shares.
3 month avg: 9,417,602 shares.

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

 

Chart pattern: Dead-cat bounce continuation pattern from 08/03/2017 to 08/03/2017

Breakout is downward 67% of the time.

Average decline: 18%.

Industry: Diversified Co.

Industry RS rank: 11 out of 56

Stock RS rank: 354 out of 593

8/3/17 close: $49.04

1 Month avg volatility: $0.77. Volatility stop (for upward breakout): $47.38 or 3.4% below the close.

Change YTD: 0.99%

Volume: 1,011,500 shares.
3 month avg: 1,405,788 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: Triangle, symmetrical continuation pattern from 07/19/2017 to 08/03/2017

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 (Prop/Casualty)

Industry RS rank: 14 out of 56

Stock RS rank: 367 out of 593

8/3/17 close: $69.20

1 Month avg volatility: $0.86. Volatility stop (for downward breakout): $71.18 or 2.9% above the close.

Change YTD: 4.04%

Volume: 488,300 shares.
3 month avg: 384,712 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: Broadening top, right-angled and ascending reversal pattern from 06/19/2017 to 07/28/2017

Breakout is downward 66% of the time.

Average decline: 15%.

Break-even failure rate: 20%.

Pullbacks occur 65% of the time.

Price hits measure rule target 32% of the time.

Industry: Semiconductor Cap Equip.

Industry RS rank: 9 out of 56

Stock RS rank: 258 out of 593

8/3/17 close: $62.90

1 Month avg volatility: $1.27. Volatility stop (for downward breakout): $65.48 or 4.1% above the close.

Change YTD: 4.19%

Volume: 2,463,000 shares.
3 month avg: 3,158,815 shares.

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

 

Chart pattern: Horn top reversal pattern from 07/10/2017 to 07/24/2017

Breakout is downward 100% of the time.

Average decline: 21%.

Break-even failure rate: 7%.

Pullbacks occur 33% of the time.

Price hits measure rule target 70% of the time.

Industry: Homebuilding

Industry RS rank: 5 out of 56

Stock RS rank: 220 out of 593

8/3/17 close: $38.55

1 Month avg volatility: $0.38. Volatility stop (for upward breakout): $37.66 or 2.3% below the close.

Change YTD: 13.88%

Volume: 1,337,100 shares.
3 month avg: 1,318,555 shares.

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

 

Chart pattern: Triangle, symmetrical continuation pattern from 06/20/2017 to 08/03/2017

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.

Thursday 8/3/17. Intraday Market Direction: Dow

Weekly, since inception on 6/14/2011:

     The prediction of the index closing higher has been right 134/233 or 57.5% of the time.

     The prediction of the index closing lower has been right 42/82 or 51.2% 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 Dow on the 5-minute scale. It should have been the Nasdaq but I screwed up.

The chart shows a picture of an ascending triangle highlighted in red.

It has a flat top and up-sloping bottom, just as you would expect.

According to my book,
Chart Patterns: After the Buy,
64% of ascending triangles break out upward.

But hold on.

Today’s (Wednesday) chart pattern indicator has turned bearish. The signal could disappear in the coming days, and frequently does, so it’s not an immediate concern. But if it lasts,
if could mean a drop (retrace, probably) is coming.

$ $ $

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 8/2/17. 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 bullish vertical green bar on the far right remains intact.

Let’s look at the indicator line. This time I remembered to mark it. Notice that the line is rising (A). That is also bullish.

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 above text highlights a contradiction. The red line improved with fewer stocks in bear market territory but the blue line said that the average distance below the yearly high has decreased.

I’m not sure what to make of this. But given the prior chart is still bullish, that’s how I continue to lean.

— Thomas Bulkowski

Tuesday 8/1/17. Intraday Market Direction: Dow

Weekly, since inception on 6/14/2011:

     The prediction of the index closing higher has been right 140/240 or 58.3% of the time.

     The prediction of the index closing lower has been right 32/65 or 49.2% 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 Dow industrials on the 5-minute scale.

Nothing much to report about Monday’s trading.

The chart shows an upward-sloping channel. I drew the lines connecting the peaks and valleys.

This channel is similar to the one I blogged about on the Nasdaq. That channel saw the index continuing higher until Thursday when it plummeted.
The Dow might follow a similar trend, but I have my doubts. Still, the index isn’t moving up vertically, so there’s hope this upward trend can continue. (Shallow rises last longer than more vertical
ones.)

$ $ $

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

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