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Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Busted
Patterns
Candles Chart
Patterns
Event
Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 05/26/2017
21,080 -2.67 0.0%
9,176 12.36 0.1%
720 -0.08 0.0%
6,210 4.93 0.1%
2,416 0.75 0.0%
YTD
6.7%
1.5%
9.2%
15.4%
7.9%
Tom's Targets    Overview: 05/15/2017
21,400 or 20,450 by 06/01/2017
9,500 or 8,700 by 06/01/2017
730 or 700 by 06/15/2017
6,350 or 6,000 by 06/01/2017
2,450 or 2,375 by 06/15/2017

  Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.

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Monday 5/29/17. Market Monday: The Week Ahead

My Prediction

Picture of the Dow utilities on the daily scale.

I show the Dow utilities on the daily scale.

Buried in the OHLC price chart is an ascending triangle. I show it highlighted in red.

It broke out downward, which ascending triangles do 36% of the time, according to my book, Chart Patterns: After the BuyChart Patterns: After the Buy.

I show a picture of the book on the left in case you want to buy a copy and catch up with the rest of the trading community.

Anyway, this triangle busted, meaning it reversed direction and closed above the top of the triangle.

The same book will tell you that a downward breakout from an ascending triangle busts 44% of the time in stocks on the daily charts. If they single bust (breakout downward, reverse, and keep rising), a perfect trade, traded enough, will average 49%. Wow.

Don't expect the index to rise that far, of course. It could rise farther.

Have a good holiday weekend. I'll catch you on the far side. I'll be working on my giraffe, a wooden sculpture with a fat torso, very long neck (about 30") and modest sized-ears. I'll post a pic of it on my facebook account, like I do most personal stuff, when it's done.

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A Brief Look Back

Picture of a flower from my garden.

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 89.99 points.
Tuesday: Up 43.08 points.
Wednesday: Up 74.51 points.
Thursday: Up 70.53 points.
Friday: Down 2.67 points.

For the Week...

The Dow industrials were up 275.44 points or 1.3%.
The Nasdaq composite was up 126.49 points or 2.1%.
The S&P 500 index was up 34.09 points or 1.4%.

Year to Date...

Dow Industrials
     0.4% down from the high of 21,169.11 on 03/01/2017.
     7.1% up from the low of 19,677.94 on 01/19/2017.
Nasdaq
     0.1% down from the high of 6,217.34 on 05/25/2017.
     15.0% up from the low of 5,397.99 on 01/03/2017.
S&P 500
     0.1% down from the high of 2,418.71 on 05/25/2017.
     7.6% up from the low of 2,245.13 on 01/03/2017.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 05/26/2017, the CPI had:

10 bearish patterns,
33 bullish patterns,
399 patterns waiting for breakout.
The CPI signal is 76.7%, which is bullish (>= 65%).

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.

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  21,032  21,056  21,075  21,099  21,117 
Weekly  20,765  20,923  21,018  21,175  21,270 
Monthly  20,356  20,718  20,915  21,277  21,474 
S&P500 (^GSPC): Daily  2,410  2,413  2,415  2,418  2,419 
Weekly  2,375  2,396  2,407  2,427  2,439 
Monthly  2,330  2,373  2,396  2,439  2,462 
Nasdaq (^IXIC): Daily  6,191  6,201  6,206  6,216  6,221 
Weekly  6,055  6,133  6,175  6,253  6,295 
Monthly  5,886  6,048  6,133  6,295  6,380 
  • 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

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Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 1 week up 42.5%   Expect a random direction. 
 2 months up 39.7%   The trend may continue. 
 S & P 500 (^GSPC) 1 week up 42.4%   Expect a random direction. 
 2 months up 42.6%   Expect a random direction. 
 Nasdaq composite (^IXIC) 1 week up 45.5%   Expect a random direction. 
 7 months up 3.3%   Expect a reversal soon. 

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.

 Found Chart Pattern Name
10Double Top, Adam and Adam
9Dead-cat bounce
9Pipe top
7Triangle, symmetrical
6Broadening top
6Double Bottom, Adam and Adam
5Triangle, descending
4Diamond top
4Triple top
4Double Top, Eve and Adam

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.

This WeekLast Week
1. Semiconductor Cap Equip.1. Semiconductor Cap Equip.
2. Semiconductor2. Semiconductor
3. Medical Supplies3. Homebuilding
4. Internet4. Computers and Peripherals
5. Precision Instrument5. Medical Services
50. Retail (Special Lines)50. Retail (Special Lines)
51. Retail Store51. Retail Store
52. Trucking/Transp. Leasing52. Oilfield Svcs/Equipment
53. Short ETFs53. Trucking/Transp. Leasing
54. Oilfield Svcs/Equipment54. Petroleum (Producing)
55. Petroleum (Producing)55. Short ETFs
56. Furn/Home Furnishings56. Furn/Home Furnishings
57. Apparel57. Apparel

-- Thomas Bulkowski

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Friday 5/26/17. 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 10 patterns found this week (excluding pipe bottoms; pipe tops and bottoms are found looking back 2 weeks) out of 602 stocks searched, or 1.7%. Based on the percentage, the stock market is trending since few consolidation patterns appear.

Excluding ETFs, there were 4 bullish chart patterns this week and 4 bearish ones with any remaining (2) 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

 

Symbol Chart Pattern Bullish
Bearish
Start End Industry
AEISChannel      04/29/201605/25/2017Semiconductor
BGHorn bottom      05/01/201705/15/2017Food Processing
GPSBroadening top, right-angled and ascending      01/17/201705/25/2017Apparel
GSOLFlag, high and tight      03/28/201705/25/2017Advertising
IDATriple bottom      05/03/201705/19/2017Electric Utility (West)
IVCTriangle, symmetrical      05/09/201705/24/2017Medical Supplies
JCOMBroadening top, right-angled and ascending      02/16/201705/19/2017Internet
MONTriangle, descending      04/21/201705/25/2017Chemical (Diversified)
OMITriangle, descending      05/09/201705/25/2017Medical Supplies
PANWDiamond top      05/05/201705/25/2017Computer Software and Svcs

 

Weekly screen for chart patterns ending between 05/18/2017 and 05/25/2017. Many may be still in development. If no securities appear, then I have not identified any new patterns.

Definitions
RS is relative strength (where 1 is best). For other definitions, see the glossary.
’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.
For more information, consult my book, Encyclopedia of Chart Patterns, Second Edition.
 
Advanced Energy (AEIS)
Industry: Semiconductor
WARNING: This industry is within the top 7 that Dead-cat bounce often.
Industry RS rank: 3 out of 56
Stock RS rank: 25 out of 594
5/25/17 close: $76.79
1 Month avg volatility: $2.09. Volatility stop (for upward breakout): $72.26 or 5.9% below the close.
Change YTD: 40.26%
Volume: 359,000 shares. 3 month avg: 434,757 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: Channel from 04/29/2016 to 05/25/2017

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Bunge Ltd (BG)
Industry: Food Processing
Industry RS rank: 38 out of 56
Stock RS rank: 85 out of 594
5/25/17 close: $83.22
1 Month avg volatility: $2.27. Volatility stop (for upward breakout): $76.90 or 7.6% below the close.
Change YTD: 15.20%
Volume: 2,989,200 shares. 3 month avg: 1,703,466 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: Horn bottom reversal pattern from 05/01/2017 to 05/15/2017
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.

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Gap Inc. (GPS)
Industry: Apparel
Industry RS rank: 56 out of 56
Stock RS rank: 510 out of 594
5/25/17 close: $22.02
1 Month avg volatility: $0.68. Volatility stop (for downward breakout): $23.92 or 8.6% above the close.
Change YTD: -1.87%
Volume: 6,869,300 shares. 3 month avg: 5,813,078 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 01/17/2017 to 05/25/2017
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.

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Global Sources Ltd (GSOL)
Industry: Advertising
Industry RS rank: 33 out of 56
Stock RS rank: 1 out of 594
5/25/17 close: $21.45
1 Month avg volatility: $0.41. Volatility stop (for upward breakout): $20.28 or 5.5% below the close.
Change YTD: 142.37%
Volume: 377,700 shares. 3 month avg: 30,762 shares.
This security may be thinly traded (less than 100k 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: Flag, high and tight continuation pattern from 03/28/2017 to 05/25/2017
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.

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IDACORP Inc (IDA)
Industry: Electric Utility (West)
Industry RS rank: 12 out of 56
Stock RS rank: 214 out of 594
5/25/17 close: $86.31
1 Month avg volatility: $1.07. Volatility stop (for upward breakout): $83.39 or 3.4% below the close.
Change YTD: 7.15%
Volume: 125,600 shares. 3 month avg: 203,328 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: Triple bottom reversal pattern from 05/03/2017 to 05/19/2017
Breakout is upward 100% of the time.
Average rise: 37%.
Break-even failure rate: 4%.
Throwbacks occur 64% of the time.
Price hits measure rule target 64% of the time.

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Invacare Corp. (IVC)
Industry: Medical Supplies
Industry RS rank: 2 out of 56
Stock RS rank: 67 out of 594
5/25/17 close: $14.65
1 Month avg volatility: $0.63. Volatility stop (for upward breakout): $13.23 or 9.7% below the close.
Change YTD: 12.26%
Volume: 93,700 shares. 3 month avg: 283,832 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: Triangle, symmetrical continuation pattern from 05/09/2017 to 05/24/2017
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.

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J2 Global Communications Inc. (JCOM)
Industry: Internet
WARNING: This industry is within the top 7 that Dead-cat bounce often.
Industry RS rank: 4 out of 56
Stock RS rank: 223 out of 594
5/25/17 close: $84.89
1 Month avg volatility: $1.74. Volatility stop (for downward breakout): $88.90 or 4.7% above the close.
Change YTD: 3.78%
Volume: 355,300 shares. 3 month avg: 375,692 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: Broadening top, right-angled and ascending reversal pattern from 02/16/2017 to 05/19/2017
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.

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Monsanto Co (MON)
Industry: Chemical (Diversified)
Industry RS rank: 30 out of 56
Stock RS rank: 197 out of 594
5/25/17 close: $116.53
1 Month avg volatility: $0.58. Volatility stop (for downward breakout): $117.73 or 1.0% above the close.
Change YTD: 10.76%
Volume: 831,400 shares. 3 month avg: 2,033,140 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: Triangle, descending reversal pattern from 04/21/2017 to 05/25/2017
Breakout is downward 64% of the time.
Average decline: 16%.
Break-even failure rate: 16%.
Pullbacks occur 54% of the time.
Price hits measure rule target 54% of the time.

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Owens and Minor Inc (OMI)
Industry: Medical Supplies
Industry RS rank: 2 out of 56
Stock RS rank: 447 out of 594
5/25/17 close: $32.17
1 Month avg volatility: $0.53. Volatility stop (for downward breakout): $33.44 or 4.0% above the close.
Change YTD: -8.84%
Volume: 652,100 shares. 3 month avg: 689,768 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: Triangle, descending reversal pattern from 05/09/2017 to 05/25/2017
Breakout is downward 64% of the time.
Average decline: 16%.
Break-even failure rate: 16%.
Pullbacks occur 54% of the time.
Price hits measure rule target 54% of the time.

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Palto Alto Networks Inc (PANW)
Industry: Computer Software and Svcs
Industry RS rank: 10 out of 56
Stock RS rank: 509 out of 594
5/25/17 close: $117.64
1 Month avg volatility: $2.31. Volatility stop (for downward breakout): $123.99 or 5.4% above the close.
Change YTD: -5.93%
Volume: 1,237,300 shares. 3 month avg: 2,210,932 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: Diamond top reversal pattern from 05/05/2017 to 05/25/2017
WARNING: A dead-cat bounce occurred on 03/01/2017. There is a 26% chance that a 15% or higher decline will occur (or has occurred since then) by 05/31/2017 and a 38% chance by 08/30/2017.
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.

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Thursday 5/25/17. Intraday Market Direction: Nasdaq

The index climbed by 0.4% or 24.31 points. Since 02/05/1971 the index made 580 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 369 occasions.
     Average loss was -0.7% on 211 occasions.
Expect the index to close higher 63.6% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 128/223 or 57.4% 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.

Picture of the Nasdaq composite on the 5 minute scale.

$ $ $

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

Highlighted in red is an ascending triangle. It looks suspiciously like the one we saw in the Dow two days ago. I drew the bottom of the pattern with a thin red line. It helps show that the breakout from this triangle was downward.

Then it busted, setting the stage for a strong rally.

However, being late in the trading session, only a portion of that rally appears on the chart. Meanwhile, the chart pattern indicator has flipped to bearish, erasing a bullish signal from yesterday.

So there you have it. The busted triangle suggests a strong rally will unfold, but the CPI has turned bearish. Maybe that's the difference between short- and long-term signals.

$ $ $

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

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© 2017 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  5,698.50    
 Monthly S1  5,930.76  232.26   
 Weekly S2  5,936.65  5.89   
 Weekly S1  6,049.83  113.19   
 Monthly Pivot  6,050.46  0.63   Yes! The Monthly Pivot is close to the Weekly S1.
 Weekly Pivot  6,110.00  59.54   
 Daily S2  6,129.39  19.39   
 Low  6,139.33  9.94   
 Daily S1  6,146.20  6.87   
 61.8% Down from Intraday High  6,149.55  3.35   
 50% Down from Intraday High  6,152.71  3.16   
 Open  6,154.18  1.47   Yes! The Open is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  6,155.87  1.69   Yes! The 38.2% Down from Intraday High is close to the Open.
 Daily Pivot  6,156.15  0.28   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Close  6,163.02  6.87   
 High  6,166.09  3.07   
 Daily R1  6,172.96  6.87   
 Daily R2  6,182.91  9.94   
 Weekly R1  6,223.18  40.28   
 Monthly R1  6,282.72  59.54   
 Weekly R2  6,283.35  0.63   Yes! The Weekly R2 is close to the Monthly R1.
 Monthly R2  6,402.42  119.07   

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.