Chart Pattern Indicator: What's It Say?…

Monday 12/7/20. Market Monday: The Week Ahead

My Prediction

I had in mind to show you the Nasdaq composite but pulled up this chart instead. I haven’t lost my mind. I know exactly where I left it.

Let’s go through the chart, starting from the left.

The twin bottom at E is a double bottom. It has two valleys which bottom near the same price. It confirms as a valid double bottom when the index closes above
the highest peak between the two bottoms.

Peaks DC are a double top. The twin peaks top out near the same price and it is supposed to confirm as a valid chart pattern when the index closes below valley A.
I drew a horizontal brown line but it’s hard to tell if price closed below the line or not.

AB is another double bottom. The two bottoms are not at the same price, so that’s a flaw. It confirms as a valid pattern when price closes above the blue line.

More recently are the two up-sloping red lines highlighting a rising wedge. Rising wedges breakout downward 60% of the time. That’s not much above random.

This wedge has price touching the trendlines plenty of times, but it also looks loose, not tight. That means there’s not a lot of overlap between the price bars. I did a study of overlap
and showed that flags (I think) with lots of overlap outperformed.

This one looks like it might breakout upward.

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: Down 271.73 points.

Tuesday: Up 185.28 points.

Wednesday: Up 59.87 points.

Thursday: Up 85.73 points.

Friday: Up 248.74 points.

For the Week…

The Dow industrials were up 307.89 points or 1.0%.

The Nasdaq composite was up 258.38 points or 2.1%.

The S&P 500 index was up 60.77 points or 1.7%.

Year to Date…

Dow Industrials

     0.0% down from the high of 30,218.26 on 12/04/2020.

     65.9% up from the low of 18,213.65 on 03/23/2020.

Nasdaq

     0.0% down from the high of 12,464.23 on 12/04/2020.

     88.0% up from the low of 6,631.42 on 03/23/2020.

S&P 500

     0.0% down from the high of 3,699.20 on 12/04/2020.

     68.8% up from the low of 2,191.86 on 03/23/2020.

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 is over.

Mutual funds will begin dividend distributions and rebalancing their portfolios for the approaching year end (starts in late November).

Here’s a symbol list of 134 chart and candlestick patterns (13 “investment grade” candle patterns) found in today’s securities using my version of Patternz:
AES, AMN, APH, ANTM, APA, ATR, ACGL, ARW, ASH, ATO, AXS, BIG, BKH, BRC, CBT, COG, CENX, CRL, CIEN, CLNE, ED, CONN, CLR, GLW, COST, CRH, CTS, DVN, DOV, EOG, EL, RE, EXC, XOM, FDS, FCX, THG, HLIT, HQY, HP, HSIC, HNI, INFN, IBP, IIIN, IPG, IPI, KALU, KMT, LANC, LNC, L, LXU, MRO, MAS, MRK, MUR, NBR, CNR, NCR, NTGR, NEU, NEE, OXY, ORI, PATK, PDCO, PTEN, PFE, PICO, PLXS, POL, PFG, RJF, RGS, RGA, RHI, SAIA, CRM, SLB, SEIC, SO, SCCO, SRDX, TECH, TFX, TKR, TG, SLCA, UPS, UNM, V, WAT, WWW, WDAY, ZBRA, IYK, IYE, IEO, IEZ, FTEC, BOTZ, IYZ, IGE, IYF, EWO, EEM, EWH, EWI, EWS, EWY, EWP, EWT, EWU, PXJ, IEV, IXC, XLE, XLF, XLU. 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 12/4/20. Pattern Trading Setups for the Weekend.

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Here’s a symbol list of 141 chart and candlestick patterns (13 “investment grade” candle patterns) found in today’s securities using my version of Patternz:
ADBE, ADTN, AMD, AES, ALRM, ALK, ALB, ALKS, ADS, DOX, AEO, APH, AMAT, AIZ, BBBY, BIIB, BKH, BA, BRC, BBW, BLDR, CBT, CPB, CE, CENX, CRL, CIEN, CTSH, CMCO, CONN, COTY, CMI, DECK, DVN, D, DOV, EXP, RE, EVH, FDS, FOE, FIS, FEYE, FCX, FDP, FRD, GNW, GES, HBI, THG, HLIT, HE, HQY, HTLD, HL, HD, INTU, IVC, JKHY, LH, LAWS, LEN, LLY, LXU, MHO, MCHX, MTRN, MTRX, MDCA, MU, MCO, MUR, NTGR, NWPX, PKG, PKE, PATK, PRFT, PETS, PFE, PCG, PICO, PNW, PFG, PG, RL, RGA, REV, SAIA, SLGN, SKX, LUV, SXI, TPR, TEVA, TOL, UGI, UPS, VFC, VRSN, VMC, WRB, WAT, WERN, WLK, WWW, XLNX, FXL, EWA, EWO, EWK, EWZ, EWC, EEM, EWM, EWW, EPP, EWS, EWY, EWT, THD, TUR, EWU, ILF, XLF, XRT, UNG, USO. 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.

There were 27 patterns found this week (excluding pipe bottoms; pipe tops and bottoms are found looking back 2 weeks) out of 579 stocks searched, or 4.7%. 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 16 bullish chart patterns this week and 6 bearish ones with any remaining (6) 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.

For details about the chart patterns, click here.

— Thomas Bulkowski

Thursday 12/3/20. Intraday Market Direction: Nasdaq

Weekly, since inception on 6/14/2011:

     The prediction of the index closing higher has been right 202/360 or 56.1% of the time.

     The prediction of the index closing lower has been right 57/117 or 48.7% 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.

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

I drew three trendlines, shown here in red, A, B, and C. Notice that they are getting steeper and shorter.

They remind me of fan lines. I looked into them once but they didn’t make a lot of sense to me, so I didn’t pursue them. (Fan lines are not covered on my website… I checked).
You might say I’m not a fan of fan lines.
To me, fan lines make as much sense as taking the width, not the height, of a rectangle and projecting it upward from the top of the pattern and claiming that’s the price target. Anyway, I digress.

The blue line forms a small ascending triangle, with a flat top and up-sloping bottom. Ascending triangles breakout upward 63% of the time. That’s almost 2 of every 3
trades.

Of course, that statistics comes from patterns on the daily charts. With intraday data like you see here, the opening bell can throw the index around a lot, so there’s no telling what
will happen.

Today was a weak day which saw the CPI (Chart Pattern Indicator) drop. The entire market looked weak to me, so I’d be cautious about expecting that upward breakout.

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Here’s a symbol list of 104 chart and candlestick patterns (13 “investment grade” candle patterns) found in today’s securities using my version of Patternz:
DDD, ACIW, AFL, DOX, AXP, AIG, ANTM, ARW, BCPC, BSET, BKH, BA, BOOT, BRC, CBT, CPB, CLS, CNP, CENX, CRL, CVX, CHS, ED, CSOD, GLW, CTS, DDS, ^DJT, EXP, RE, EXC, XOM, FAST, FIS, FE, FRD, GE, GL, HE, HTLD, HP, HON, HUBG, INCY, JKHY, LH, RAMP, LOW, LXU, MHO, MCO, NOV, NTAP, NVDA, OGE, ORI, PATK, PDCO, PFE, PICO, POR, PG, PRU, RJF, RGS, RGA, REV, ROK, CRM, SLB, SCHW, SLGN, LUV, SSYS, TECH, TEVA, TG, SLCA, VLO, VRTX, WAT, WERN, WLK, WWW, ITA, IYE, FXI, IHF, IGV, IGE, IYF, EWC, EWY, EWP, EWT, PPA, IXC, XLE, XLF, XLU. 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 12/2/20. 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.

Much to my surprise, the index didn’t fall and issue a bearish signal. Rather, the index climbed and took the general market with it. The CPI responded by soaring, as the thin blue
line near the bottom of the chart shows.

The index broke out upward from an ascending triangle (shown here in what looks to be black but is really blue). The breakout wasn’t a robust one where price shoots off. Rather, it looked like a doji candle.

That means the index closed near where it opened. It could mean underlying softness in the market, but not by the number of industries moving up today. I’m starting to rethink my position
that covid news over the next 2 weeks will suck the markets lower. Guess I’ll have to wait to find out for sure.

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 two lines, the red and blue ones, made no net progress as measured from a week ago. I wonder if that’s another signal that there’s underlying weakness in the markets.

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Here’s a symbol list of 179 chart and candlestick patterns (13 “investment grade” candle patterns) found in today’s securities using my version of Patternz:
ATSG, ALRM, AA, AEE, AIG, AMGN, AON, APA, AMAT, ACGL, ASH, AIZ, AGO, AXS, BKH, BKNG, EPAY, BRC, CBT, CALM, CX, CNC, CNP, CENX, CRL, CHS, CINF, CNA, CNO, CMTL, COP, COTY, CRH, CCK, CTS, DECK, DVN, DRQ, EXP, EMN, EIX, WIRE, EOG, RE, FAST, FIS, FISV, FLIR, FRD, GIS, GL, GFF, THG, HSC, HIG, HSII, HELE, HNI, DHI, IDA, IEX, ITW, ILMN, NSP, IIIN, INTC, IPAR, KALU, KSS, LRCX, LAWS, L, LOW, LXU, MAN, MCHX, MLM, MCO, MUR, NOV, NCR, NJR, ORI, PKG, PATK, PDCO, PTEN, PETS, PFE, POR, PPG, PPL, PGR, RGA, RLI, RHI, ROK, SCHW, SEIC, SIGI, SLGN, SO, LUV, SWN, SXI, TER, TXN, TKR, TOL, TRV, SLCA, UPS, VFC, V, VMC, WRB, WLK, WWW, IYM, IYC, IYE, IHI, IEZ, IHE, FTEC, QTEC, FXI, BOTZ, ICF, IYH, IAT, IGV, SOXX, IGE, IYF, EWA, EWO, EWK, EWZ, EEM, EWH, EIS, EWJ, EWM, EWW, EPP, EWS, EZA, EWT, TUR, EWU, QLD, PPA, QQQ, ROBO, IXC, IXN, ILF, SSO, MXI, XLY, XLE, XLV, XHB, XLB, SPY, XAR, XLK, XLU, VHT, 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.

— Thomas Bulkowski

Tuesday 12/1/20. 2020 Forecast Update for December

Weekly, since inception on 6/14/2011:

     The prediction of the index closing higher has been right 216/375 or 57.6% of the time.

     The prediction of the index closing lower has been right 41/84 or 48.8% of the time.

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Here’s the updated 2020 forecast for December, presented in slider format.

Based on sector performance from Fidelity, the best performing sectors for year to date performance as of 30 November 2020 were…
(The numbering is how they ranked a month ago.)

1. Information technology (+33.7%),

2. Consumer discretionary (+29.8%),

3. Communication services (+19.5%),

5. Materials (+16.5%),

7. Industrials (+8.9%),

4. Health care (+7.1%),

6. Consumer staples (+6.2%),

6. Utilities (-1.8%),

9. Real estate (-5.3%),

10. Financials (-7.8%),

11. and dead last is energy (-36.5%).

Here’s how they rank the industries, but only the top 10 appear. Year to date returns. The numbering is how they ranked a month ago.

2. Internet & direct marketing retail (+64.6%),

1. Technology hardware, storage & Peripherals (+53.2%),

5. Metals & mining (+38.3%),

4. Air freight and logistics (51.3%)

7. Semiconductors & semiconductor equipment (+35.9%),

3. Software (+38.7%),

10. Trading companies, distributors (30.6%)

(new). Construction & Engineering (+35.3%),

6. Life sciences tools & Services (+25.8%),

(new). Multi-line retail (+25.7%),

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Here’s a symbol list of 123 chart and candlestick patterns (13 “investment grade” candle patterns) found in today’s securities using my version of Patternz:
DDD, ADTN, AKAM, ALKS, AEE, AEL, AMWD, ARCB, ACGL, AWI, ASH, BMI, BCPC, BAX, BZH, BIG, BKH, BAH, CNC, CNP, CSCO, CMTL, ED, COP, GLW, COST, CRH, CROX, DVN, DDS, DRQ, DUK, EIX, EIGI, EQT, RE, EXC, FEYE, FRD, GME, GFF, HIG, HTLD, HL, HSII, DHI, HURC, ITW, INTC, IPI, JAZZ, KMB, LEG, LNC, LMT, LOW, MRO, MTRX, NJR, OXY, OGE, ASGN, OMI, PTEN, PFE, PNW, PPL, RMBS, RJF, RGS, REV, RLI, ROK, RCKY, ROST, SEE, SMTC, SKX, SO, SWN, TPR, TDOC, TMO, TJX, TOL, VFC, WRB, WMT, ITA, IAI, IYE, IHE, FXL, BOTZ, SLV, IGE, IYF, EWO, EWC, EWQ, EWG, EWI, EZA, EWP, EWL, IEV, IXC, MXI, XLE, XLF, XRT, XAR, XLU. 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