As of 08/06/2020
  Indus: 27,387 +185.46 +0.7%  
  Trans: 10,331 +115.68 +1.1%  
  Utils: 829 +3.50 +0.4%  
  Nasdaq: 11,108 +109.67 +1.0%  
  S&P 500: 3,349 +21.39 +0.6%  
YTD
-4.0%  
-5.2%  
-5.7%  
 +23.8%  
 +3.7%  
  Targets    Overview: 07/31/2020  
  Up arrow28,150 or 25,000 by 08/15/2020
  Up arrow10,600 or 9,400 by 08/15/2020
  Up arrow870 or 800 by 08/15/2020
  Up arrow11,300 or 10,200 by 08/15/2020
  Up arrow3,355 or 3,100 by 08/15/2020
CPI (updated daily): Arrows on 6/29/20
As of 08/06/2020
  Indus: 27,387 +185.46 +0.7%  
  Trans: 10,331 +115.68 +1.1%  
  Utils: 829 +3.50 +0.4%  
  Nasdaq: 11,108 +109.67 +1.0%  
  S&P 500: 3,349 +21.39 +0.6%  
YTD
-4.0%  
-5.2%  
-5.7%  
 +23.8%  
 +3.7%  
  Targets    Overview: 07/31/2020  
  Up arrow28,150 or 25,000 by 08/15/2020
  Up arrow10,600 or 9,400 by 08/15/2020
  Up arrow870 or 800 by 08/15/2020
  Up arrow11,300 or 10,200 by 08/15/2020
  Up arrow3,355 or 3,100 by 08/15/2020
CPI (updated daily): Arrows on 6/29/20

Bulkowski on the Diving Board Pattern

 

My book, Encyclopedia of Chart Patterns Second EditionEncyclopedia of Chart Patterns 2nd Edition book., pictured on the left, does not cover the diving board but it has 63 other chart and event patterns.

If you click on the above link and then buy the book (or anything) while at Amazon.com, the referral will help support this site. Thanks.

-- Tom Bulkowski

$ $ $

Statistics updated 4/8/2020.

I discovered the diving board chart pattern on November 25, 2010 -- Thanksgiving Day -- when I went shopping for stocks to buy. I noticed that price formed a flat base (the diving board) and then plunged downward (diving into the water) followed by a straight-line run up (returning to the surface and climbing out of the water). The flat base and downward plunge reminded me of jumping off a diving board, hence the pattern's name.

I found 760 diving board patterns with upward breakouts using the weekly charts in 513 stocks from May 1990 to June 2019. It's somewhat rare but plentiful enough to find during a diligent search. A spot check of the pattern reveals that it also appears on the daily charts, but I didn't study those. The discussion below pertains to diving boards on the weekly scale.

The ideal diving board chart pattern, in the graphic below, shows the shape of the pattern.

The ideal diving board chart pattern
Ideal Diving Board Pattern

Diving Board: Important Bull Market Results

Overall performance rank (1 is best): Not ranked (because it's on the weekly scale)
Break even failure rate: 4%
Average rise: 73%

The above numbers are based on 760 perfect trades in a bull market. See the glossary for definitions.

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Diving Board: Identification Guidelines

CharacteristicDiscussion
Weekly scaleUse the weekly price chart to find this pattern.
Price trendI removed most diving boards which appeared in downward trends. I prefer to find them in flat or upward trends.
Diving boardLook for price to have a flat bottom, not top (the top can be any shape, but a flat bottom is critical). This is the diving board.
PlungePrice makes a straight-line run down or nearly so (see Plunge in the figure below). This is the plunge into the water.
2nd PlungeAvoid trading patterns which make a second, lower plunge.
RecoveryAfter the sharp drop, price recovers, sometimes in a straight-line run upward. This is the move from the bottom of the pond back onto shore.

Picture of a diving board.

Look for the diving board chart pattern on the weekly scale. That's the scale I was using when I noticed it, so you can find it on the daily and other charts but performance will vary.

Price should make a flat base. In other words, the bottoms of price should line up with few outliers plunging through the bottom. I prefer a tight congestion region that's horizontal, but allow variations. I counted a few patterns with slanting bases (forming symmetrical triangles). A horizontal congestion region seemed to give the best performance. The median width of the pattern (including the plunge) was 204 days (about 7 months).

After the flat base, look for a price plunge. I prefer a straight-line drop down, not one that meandered lower and had lots of consolidation regions. I wanted the decline to be a serious one, one that shakes bulls to the core.

The drop from the bottom of the board portion of the pattern to the plunge low was a median of 14%.

Note: The following paragraph refers to data updated in February 2018. Once price reverses at the bottom of its plunge, it rises often in a straight-line move up (but not always). I found that 88% climbed far enough to at least reach the bottom of the board before encountering a trend change (a drop of at least 20%). Twenty-five percent stopped rising within the diving board (top of pattern to bottom of the board, not the plunge). Fully 63% continued rising above the top of the pattern.

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Diving Board: Trading Tips

The median diving board length was 204 days (from board start to plunge low). Those with boards narrower than 204 days showed gains averaging 67% versus those with longer boards and gains of 80%.

Trading TacticExplanation
Diving board length, heightWider (longer than 204 days) is better. Taller is better (height divided by the breakout price (pattern top) greater than 27%).
Ride itPrice returns to the diving board bottom 88% of the time before changing trend
Buy signalWhen price closes above the top of the chart pattern, buy. The gain from there to the ultimate high averages 73%. This is the preferred method to trade a diving board.
2nd PlungeAvoid trading patterns which make a second, lower plunge.

If you can determine when the plunge has ended, such as using a down-sloping trendline, then that could get you into the trade early.

Hold onto the trade as long as the upward trend continues. As a benchmark, I used a trend change to signal the end of a trend. That means price turned down at least 20% after peaking. Measuring the climb from the plunge low to that peak showed that 88% of the patterns had price reaching or exceeding the bottom of the diving board.

Trading the rise from the plunge low back to the bottom of the board (or higher), is a high risk proposition. The preferred method of trading a diving board, is to wait for price to close above the top of the pattern, then buy and hold for a year, perhaps two.

A diving board chart pattern example

Diving Board: Example

The chart shows an example of a diving board chart pattern on the weekly scale in Albemarle (ALB), outlined in red.

Price moves horizontally in a congestion region for about four months before making a plunge lower. Traders versed in chart patterns will recognize a descending triangle (thin green line on the top, red below).

The stock reversed after the plunge bottomed in February. The stock recovered nicely and continued to soar above the top of the diving board pattern.

-- Thomas Bulkowski

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Diving Board: Other Examples

See Also

 

Support this site! Clicking any of the books (below) takes you to Amazon.com. If you buy ANYTHING while there, they pay for the referral.

My novels:  Bumper's Story Head's Law

Chart Patterns: After the Buy Getting Started in Chart Patterns, Second Edition Trading Basics Fundamental Analysis and Position Trading Swing and Day Trading Visual Guide to Chart Patterns Encyclopedia of Candlestick Charts Encyclopedia of Chart Patterns 2nd Edition Trading Classic Chart Patterns

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Some pattern names are registered trademarks of their respective owners.

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