Chart Pattern Indicator: What's It Say?…

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

Chart pattern: Pipe top reversal pattern from 09/24/2018 to 10/01/2018

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: Retail Building Supply

Industry RS rank: 32 out of 58

Stock RS rank: 32 out of 597

10/11/18 close: $85.23

1 Month avg volatility: $1.91. Volatility stop (for downward breakout): $91.60 or 7.5% above the close.

Change YTD: 14.02%

Volume: 2,228,400 shares.
3 month avg: 2,128,008 shares.

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

 

Chart pattern: Head-and-shoulders complex top reversal pattern from 08/24/2018 to 10/09/2018

Breakout is downward 100% of the time.

Average decline: 23%.

Break-even failure rate: 4%.

Pullbacks occur 67% of the time.

Price hits measure rule target 53% of the time.

Industry: Insurance (Diversified)

Industry RS rank: 29 out of 58

Stock RS rank: 533 out of 597

10/11/18 close: $37.16

1 Month avg volatility: $1.08. Volatility stop (for downward breakout): $41.14 or 10.7% above the close.

Change YTD: -32.30%

Volume: 1,881,600 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: Double Top, Adam and Eve reversal pattern from 09/24/2018 to 10/08/2018

WARNING: A dead-cat bounce occurred on 05/02/2018. There is a 38% chance that a 15% or higher decline will occur (or has occurred since then) by 10/31/2018.

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: Apparel

Industry RS rank: 46 out of 58

Stock RS rank: 164 out of 597

10/11/18 close: $85.55

1 Month avg volatility: $1.69. Volatility stop (for downward breakout): $91.14 or 6.5% above the close.

Change YTD: 15.61%

Volume: 2,076,500 shares.
3 month avg: 2,795,366 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: Head-and-shoulders top reversal pattern from 09/14/2018 to 10/09/2018

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: Biotechnology

Industry RS rank: 5 out of 58

Stock RS rank: 161 out of 597

10/11/18 close: $175.66

1 Month avg volatility: $3.95. Volatility stop (for downward breakout): $185.73 or 5.7% above the close.

Change YTD: 17.22%

Volume: 2,382,000 shares.
3 month avg: 1,548,174 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: Pipe top reversal pattern from 09/24/2018 to 10/01/2018

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.

Thursday 10/11/18. 2018 Forecast Review

Instead of discussing how the Nasdaq is hurting, I thought it would be interesting to look at the 2018 forecast. That’s what I show in the above chart.

This is not my prediction, rather, it’s based on a 10-year cycle in the Dow (taken before Wednesday’s close, by the way). That means you average each day’s close with all years ending in 8, then plot it. I excluded the 2007-2009
bear market because I believe it was an anomaly.

The chart shows that the index is about ready to catch the forecast. Oddly, if you inverted the forecast, it would fit reality better, so far.

Any, if the forecast is correct, then we can ignore the short-term downtrend and be happy that the Dow will close over 28,000 for the year.

Keep in mind that this forecast is rarely correct (it matches about once ever decade. See 2016).

— Thomas Bulkowski

Wednesday 10/10/18. 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.

As the chart shows, the bearish red bar on the far right of the chart indicates trouble.

That signal is more than a week old, so it’s a valid signal (meaning signals can change for up to a week, but not longer).

The market has dropped, as the indicator predicted, but is more of a decline ahead? If you look at the peak in mid August on the CPI line (thin blue one at bottom of the chart),
the market and CPI have been diverging (bearish) for months now. I don’t see any suggestion of a near-term recovery (not sure what ‘near-term’ means).

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).

Two weeks ago, the red line was at 26% and it’s now 35% bearish and that’s down from 31% a week ago. Ouch. That’s a steep decline for the red line, but you can see that on the chart.

The blue line is more sedate, but it’s still weak, dropping two percentage points from a week ago, which is also a huge drop.

So both charts are bearish this week. Two cases: The charts are bearish, meaning a continued decline over the next week. Or we could be near the bottom and expect a reversal.

I’m hoping we’re near the bottom, but we might not be. Especially since quarterly reports will be coming out soon.

— Thomas Bulkowski

Tuesday 10/9/18. Intraday Market Direction: Dow

Weekly, since inception on 6/14/2011:

     The prediction of the index closing higher has been right 173/287 or 60.3% of the time.

     The prediction of the index closing lower has been right 35/69 or 50.7% 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.

Let’s tear this picture apart piece by piece, beginning in order, starting from A.

At point A, I must have tuned into the index because it was off 200 or so points when I looked. At B, after the close, I was surprised at how well the index had recovered.

Circled in blue at C is a head-and-shoulders top. The height of the pattern, from C to D, subtracted from D, gives a target which wasn’t met.

Circled in green is a more successful head-and-shoulders top. The index drops from the peak to E, fulfilling the measure rule. That’s how chart patterns are supposed to work.

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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

Monday 10/8/18. Market Monday: The Week Ahead

My Prediction

This is a chart of the S&P 500 index, SPX, really, on the daily scale.

A small double top appears at AB. It confirms as a valid chart pattern when the index closes below the lowest valley between the two peaks.

I show that as a horizontal red line, C.

Double tops don’t bother me as much as they used to. The stats say the resulting decline often isn’t much to worry about, but my pain tolerance maybe be much higher than yours.

However, it does appear the indices are headed lower, at least for a few more days.

$ $ $

I released version 7.5 of Patternz. It better handles intraday quote files, and uses a subscription to Tiingo to get news.

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 192.9 points.

Tuesday: Up 122.73 points.

Wednesday: Up 54.45 points.

Thursday: Down 200.91 points.

Friday: Down 180.43 points.

For the Week…

The Dow industrials were down 11.26 points or 0.0%.

The Nasdaq composite was down 257.9 points or 3.2%.

The S&P 500 index was down 28.41 points or 1.0%.

Year to Date…

Dow Industrials

     1.9% down from the high of 26,951.81 on 10/03/2018.

     13.3% up from the low of 23,344.52 on 04/02/2018.

Nasdaq

     4.2% down from the high of 8,133.30 on 08/30/2018.

     17.5% up from the low of 6,630.67 on 02/09/2018.

S&P 500

     1.9% down from the high of 2,940.91 on 09/21/2018.

     13.9% up from the low of 2,532.69 on 02/09/2018.

Options Expiration

No options expire this week.

Swing and Position Traders: Chart Pattern Indicator

As of 10/05/2018, the CPI had:

34 bearish patterns,

15 bullish patterns,

159 patterns waiting for breakout.

The CPI signal is 30.6%, which is
bearish (<= 35%).

The chart pattern indicator is bearish
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 will be starting in about 8 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 10/5/18. 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 21 patterns found this week (excluding pipe bottoms; pipe tops and bottoms are found looking back 2 weeks) out of 605 stocks searched, or 3.5%. Based on the percentage, the stock market is
trending since few consolidation patterns appear.

Excluding ETFs, there were 5 bullish chart patterns this week and 7 bearish ones with any remaining (9) being undecided.
The ratio of bullish to bearish patterns suggests the market is hinting of a coming bearish (down) 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: Medical Supplies

Industry RS rank: 4 out of 58

Stock RS rank: 182 out of 598

10/4/18 close: $74.25

1 Month avg volatility: $0.87. Volatility stop (for downward breakout): $77.29 or 4.1% above the close.

Change YTD: 14.87%

Volume: 3,137,200 shares.
3 month avg: 2,457,589 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 09/20/2018 to 10/01/2018

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: Retail (Special Lines)

Industry RS rank: 37 out of 58

Stock RS rank: 506 out of 598

10/4/18 close: $8.33

1 Month avg volatility: $0.35. Volatility stop (for downward breakout): $9.51 or 14.2% above the close.

Change YTD: -9.46%

Volume: 112,900 shares.
3 month avg: 99,982 shares.

This security may be thinly traded (less than 100k 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: Triple top reversal pattern from 09/04/2018 to 09/28/2018

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: Apparel

Industry RS rank: 43 out of 58

Stock RS rank: 522 out of 598

10/4/18 close: $8.05

1 Month avg volatility: $0.28. Volatility stop (for upward breakout): $7.44 or 7.6% below the close.

Change YTD: -8.73%

Volume: 1,862,500 shares.
3 month avg: 2,783,222 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: Broadening bottom reversal pattern from 09/14/2018 to 10/03/2018

WARNING: A dead-cat bounce occurred on 05/30/2018. There is a 38% chance that a 15% or higher decline will occur (or has occurred since then) by 11/28/2018.

Breakout is upward 53% of the time.

Average rise: 27%.

Break-even failure rate: 10%.

Throwbacks occur 41% of the time.

Price hits measure rule target 59% of the time.

Industry: Household Products

Industry RS rank: 46 out of 58

Stock RS rank: 181 out of 598

10/4/18 close: $58.30

1 Month avg volatility: $0.86. Volatility stop (for downward breakout): $60.43 or 3.7% above the close.

Change YTD: 16.20%

Volume: 1,592,700 shares.
3 month avg: 2,023,622 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: Double Top, Eve and Adam reversal pattern from 09/21/2018 to 10/02/2018

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: Household Products

Industry RS rank: 46 out of 58

Stock RS rank: 228 out of 598

10/4/18 close: $146.58

1 Month avg volatility: $2.33. Volatility stop (for downward breakout): $151.79 or 3.6% above the close.

Change YTD: -1.45%

Volume: 1,117,500 shares.
3 month avg: 971,306 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: Double Top, Eve and Adam reversal pattern from 09/21/2018 to 10/02/2018

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: Household Products

Industry RS rank: 46 out of 58

Stock RS rank: 492 out of 598

10/4/18 close: $64.92

1 Month avg volatility: $0.87. Volatility stop (for downward breakout): $67.19 or 3.5% above the close.

Change YTD: -13.96%

Volume: 3,707,900 shares.
3 month avg: 3,441,685 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: Head-and-shoulders top reversal pattern from 08/20/2018 to 10/02/2018

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: IT Services

Industry RS rank: 14 out of 58

Stock RS rank: 531 out of 598

10/4/18 close: $38.92

1 Month avg volatility: $0.94. Volatility stop (for downward breakout): $41.02 or 5.4% above the close.

Change YTD: -11.18%

Volume: 130,400 shares.
3 month avg: 127,302 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 top reversal pattern from 09/17/2018 to 09/24/2018

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: Computers and Peripherals

Industry RS rank: 3 out of 58

Stock RS rank: 97 out of 598

10/4/18 close: $34.65

1 Month avg volatility: $0.73. Volatility stop (for upward breakout): $32.33 or 6.7% below the close.

Change YTD: 17.34%

Volume: 373,800 shares.
3 month avg: 733,492 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: Triangle, ascending reversal pattern from 07/20/2018 to 10/04/2018

Breakout is upward 70% of the time.

Average rise: 35%.

Break-even failure rate: 13%.

Throwbacks occur 57% of the time.

Price hits measure rule target 75% of the time.

Industry: Apparel

Industry RS rank: 43 out of 58

Stock RS rank: 488 out of 598

10/4/18 close: $17.23

1 Month avg volatility: $0.40. Volatility stop (for downward breakout): $18.62 or 8.1% above the close.

Change YTD: -17.60%

Volume: 5,287,100 shares.
3 month avg: 6,164,918 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: Double Top, Adam and Adam reversal pattern from 09/21/2018 to 10/01/2018

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: Medical Supplies

Industry RS rank: 4 out of 58

Stock RS rank: 271 out of 598

10/4/18 close: $40.53

1 Month avg volatility: $0.62. Volatility stop (for upward breakout): $39.07 or 3.6% below the close.

Change YTD: -5.19%

Volume: 1,624,600 shares.
3 month avg: 3,130,522 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: Flag continuation pattern from 09/21/2018 to 10/04/2018

Breakout is upward 54% of the time.

Average rise: 23%.

Break-even failure rate: 4%.

Throwbacks occur 43% of the time.

Price hits measure rule target 64% of the time.

Industry: Aerospace/Defense

Industry RS rank: 41 out of 58

Stock RS rank: 212 out of 598

10/4/18 close: $164.71

1 Month avg volatility: $1.70. Volatility stop (for downward breakout): $169.27 or 2.8% above the close.

Change YTD: 7.40%

Volume: 2,979,100 shares.
3 month avg: 2,744,942 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 09/21/2018 to 10/01/2018

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: Machinery

Industry RS rank: 51 out of 58

Stock RS rank: 355 out of 598

10/4/18 close: $45.37

1 Month avg volatility: $0.93. Volatility stop (for upward breakout): $43.11 or 5.0% below the close.

Change YTD: 7.51%

Volume: 8,900 shares.
3 month avg: 26,271 shares.

This security may be thinly traded (less than 100k 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 09/12/2018 to 10/04/2018

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: Drug

Industry RS rank: 17 out of 58

Stock RS rank: 128 out of 598

10/4/18 close: $231.11

1 Month avg volatility: $5.15. Volatility stop (for downward breakout): $248.50 or 7.5% above the close.

Change YTD: 47.79%

Volume: 643,000 shares.
3 month avg: 512,494 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: Head-and-shoulders top reversal pattern from 07/26/2018 to 10/01/2018

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: Retail Building Supply

Industry RS rank: 47 out of 58

Stock RS rank: 99 out of 598

10/4/18 close: $110.78

1 Month avg volatility: $1.75. Volatility stop (for downward breakout): $115.33 or 4.1% above the close.

Change YTD: 19.20%

Volume: 5,608,300 shares.
3 month avg: 6,401,252 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 Adam reversal pattern from 09/21/2018 to 09/28/2018

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: Shoe

Industry RS rank: 20 out of 58

Stock RS rank: 166 out of 598

10/4/18 close: $80.18

1 Month avg volatility: $1.32. Volatility stop (for downward breakout): $85.12 or 6.2% above the close.

Change YTD: 28.19%

Volume: 9,159,700 shares.
3 month avg: 10,538,462 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, Adam and Adam reversal pattern from 09/21/2018 to 10/01/2018

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.