Bulkowski’s Pattern Styles

Written and copyright © 2010-2011 by Thomas N. Bulkowski. All rights reserved.

This article discusses new research that answers the question, which chart patterns are best for position and swing trading?

Pattern Style Summary

I wondered if some chart patterns were better suited to swing trades than position trades. Swing traders attempt to buy at or near a minor low and ride price upward to a minor high, where the trade ends. The reverse is also true, when the swing goes from minor high to low. The duration of the swing is often short, measured in weeks or a few months.

Position traders try to catch the longer-term price trend. The long-term trend includes many minor low and high swings (or the reverse, high to low) and the trade usually lasts at least 3 months, but can extend to over a year. Although the hold time can be long, it's not buy-and-hold, where an investors holds onto the stock for years, often through bull and bear markets.

I expected to see the usual players at the top of the list, but the results surprised me. Chart patterns that I hadn't considered viable trading candidates (such as three rising valleys, scallops, long islands, and diamonds) topped the list. Those that I trade often were buried lower in the list.

Refer to the tables below for the results.

Pattern Style Methodology

I used the results from my book, Encyclopedia of Chart Patterns, 2nd Edition (shown on the right) to build the tables below, but also included new chart patterns, such as Big W, roof, and inverted roof.

First, I ranked the statistics by average rise or decline. The average rise or decline is a measure from the breakout to the ultimate high or low. The ultimate high or low is the highest high or lowest low before a trend change (a move of at least 20% in the opposite direction). I was looking for the chart patterns with the highest average move.

Then I ranked the statistics by the hold time, which is the time it took price to move from the breakout of the chart pattern to the ultimate high or low. The quicker price can reach its target, the more powerful the chart pattern.

After that, I summed the two ranks and then sorted the list by the sum. That sum, as well as the other statistics, appear in the tables.

For upward breakouts, I assigned "swing" trades to those that took less than 2 months (62 calendar days) to reach the ultimate high, and "position" trade to everything else. For downward, breakouts, I used the median hold time as the separator between "swing" and "position" since the chart pattern hold times were shorter. The median is 49 days.

Pattern Style Upward Breakouts

The following is for chart patterns in bull markets with upward breakouts. The list is sorted by the sum column. See Methodology for an explanation of the columns. A rank of 1 is best.

Formation	Average Rise (%)	Days to Ultimate High	Avg Rise Rank	Hold Time Rank	Sum	Trade Style
Flags, High and Tight	69	39	1	3	4	Swing
Three Rising Valleys	41	125	7	13	20	Position
Scallops, Ascending and Inverted	43	137	5	20	25	Position
Diamond Bottoms	36	119	17	11	28	Position
Islands, Long	31	67	26	4	30	Position
Wedges, Falling	32	116	25	9	34	Position
Triangles, Descending	47	178	2	34	36	Position
Rectangles Bottoms	46	177	3	33	36	Position
Broadening Wedges, Ascending	38	161	11	25	36	Position
Double Bottoms, Adam & Eve	37	160	14	23	37	Position
Double Bottoms, Adam & Adam	35	136	18	19	37	Position
Double Bottoms, Eve & Eve	40	170	8	30	38	Position
Triangles, Symmetrical	31	124	26	12	38	Position
Rectangles Tops	39	170	9	30	39	Position
Rounding Tops	37	161	14	25	39	Position
Broadening Tops	29	116	30	9	39	Position
Pennants	25	22	37	2	39	Swing
Diamond Tops	27	81	35	5	40	Position
Formation	Average Rise (%)	Days to Ultimate High	Avg Rise Rank	Hold Time Rank	Sum	Trade Style
Flags	23	17	39	1	40	Swing
Double Bottoms, Eve & Adam	35	160	18	23	41	Position
Broadening Wedges, Descending	33	131	24	17	41	Position
Big W	31	128	26	15	41	Position
Triple Bottoms	37	165	14	28	42	Position
Head-and-Shoulders Bottoms	38	176	11	32	43	Position
Broadening Bottoms	27	112	35	8	43	Position
Roof, Inverted	25	89	37	6	43	Position
Pipe Bottom	45	194	4	40	44	Position
Rounding Bottoms	43	189	5	39	44	Position
Wedges, Rising	28	127	32	14	46	Position
Broadening Formations, Right-Angled and Ascending	29	131	30	17	47	Position
Scallops, Descending	22	106	41	7	48	Position
Bump-and-Run Reversal Bottoms	38	186	11	38	49	Position
Head-and-Shoulders Bottoms, Complex	39	257	9	41	50	Position
Cup-with-Handle	34	167	22	29	51	Position
Horn Bottoms	35	180	18	35	53	Position
Scallops, Ascending	31	162	26	27	53	Position
Broadening Formations, Right-Angled and Descending	28	146	32	21	53	Position
Triangles, Ascending	35	185	18	36	54	Position
Roof	28	152	32	22	54	Position
Islands Reversals	23	128	39	15	54	Position
Ugly Double bottoms	34	185	22	36	58	Position
Formation	Average Rise (%)	Days to Ultimate High	Avg Rise Rank	Hold Time Rank	Sum	Trade Style

Pattern Style Downward Breakouts

The following is for chart patterns in bull markets with downward breakouts. The list is sorted by the sum column. See Methodology for an explanation of the columns. A rank of 1 is best.

Formation	Average Decline (%)	Days to Ultimate Low	Avg Decline Rank	Hold Time Rank	Sum	Trade Style
Islands, Long	-22	27	2	3	5	Swing
Diamond Bottoms	-21	35	4	4	8	Swing
Pennants	-19	16	9	1	10	Swing
Broadening Wedges, Descending	-20	40	7	7	14	Swing
Rounding Tops	-19	45	9	14	23	Swing
Three Falling Peaks	-17	36	19	5	24	Swing
Flags	-16	17	25	2	27	Swing
Diamond Tops	-21	52	4	24	28	Position
Double Tops, Eve & Eve	-18	44	16	12	28	Swing
Head-and-Shoulders Tops, Complex	-23	60	1	28	29	Position
Roof, Inverted	-19	50	9	20	29	Position
Double Tops, Adam & Adam	-19	51	9	23	32	Position
Head-and-Shoulders Tops	-22	62	2	31	33	Position
Triangles, Symmetrical	-17	45	19	14	33	Swing
Double Tops, Adam & Eve	-18	49	16	19	35	Position
Scallops, Descending	-17	47	19	17	36	Swing
Broadening Bottoms	-15	40	29	7	36	Swing
Triple Tops	-19	60	9	28	37	Position
Formation	Average Decline (%)	Days to Ultimate Low	Avg Decline Rank	Hold Time Rank	Sum	Trade Style
Horn Tops	-21	67	4	34	38	Position
Double Tops, Eve & Adam	-15	43	29	10	39	Swing
Wedges, Falling	-15	43	29	10	39	Swing
Wedges, Rising	-14	38	35	6	41	Swing
Triangles, Ascending	-19	64	9	33	42	Position
Broadening Formations, Right-Angled and Descending	-15	45	29	14	43	Swing
Pipe Tops	-20	75	7	37	44	Position
Islands Reversals	-17	53	19	25	44	Position
Rectangles Bottoms	-14	41	35	9	44	Swing
Bump-and-run Reversal Tops	-19	68	9	36	45	Position
Triangles, Descending	-16	50	25	20	45	Position
Scallops, Inverted and Descending	-18	61	16	30	46	Position
Rectangles Tops	-17	56	19	27	46	Position
Broadening Formations, Right-Angled and Ascending	-15	47	29	17	46	Swing
Scallops, Ascending	-14	44	35	12	47	Swing
Broadening Tops	-15	50	29	20	49	Position
Cup-with-Handle, Inverted	-16	53	25	25	50	Position
Broadening Wedges, Ascending	-17	63	19	32	51	Position
Roof	-16	67	25	34	59	Position
Formation	Average Decline (%)	Days to Ultimate Low	Avg Decline Rank	Hold Time Rank	Sum	Trade Style

-- Thomas Bulkowski

Written and copyright © 2010-2011 by Thomas N. Bulkowski. All rights reserved. There are two ways to write error-free programs. Only the third one works.