As of 09/15/2021
  Indus: 34,814 +236.82 +0.7%  
  Trans: 14,420 +134.87 +0.9%  
  Utils: 925 +0.27 +0.0%  
  Nasdaq: 15,162 +123.77 +0.8%  
  S&P 500: 4,481 +37.65 +0.8%  
YTD
 +13.7%  
 +15.3%  
 +7.0%  
 +17.6%  
 +19.3%  
  Targets    Overview: 09/15/2021  
  Up arrow35,600 or 33,800 by 10/01/2021
  Up arrow15,400 or 14,000 by 10/01/2021
  Up arrow965 or 905 by 10/01/2021
  Up arrow15,600 or 14,700 by 10/01/2021
  Up arrow4,650 or 4,350 by 10/01/2021
CPI (updated daily): Arrows on 9/15/21
As of 09/15/2021
  Indus: 34,814 +236.82 +0.7%  
  Trans: 14,420 +134.87 +0.9%  
  Utils: 925 +0.27 +0.0%  
  Nasdaq: 15,162 +123.77 +0.8%  
  S&P 500: 4,481 +37.65 +0.8%  
YTD
 +13.7%  
 +15.3%  
 +7.0%  
 +17.6%  
 +19.3%  
  Targets    Overview: 09/15/2021  
  Up arrow35,600 or 33,800 by 10/01/2021
  Up arrow15,400 or 14,000 by 10/01/2021
  Up arrow965 or 905 by 10/01/2021
  Up arrow15,600 or 14,700 by 10/01/2021
  Up arrow4,650 or 4,350 by 10/01/2021
CPI (updated daily): Arrows on 9/15/21

Bulkowski on Patterns Before Price Doubles

 

Initial release on 2/22/2021.

Patterns Before Price Doubles: Summary

I used Patternz to find chart patterns in stocks near where price started to double.

I found that within 2 months before a stock began its move to double in price, ugly double bottoms were seen most often.

Two months after price began to double, a V top appeared most often.

If you consider a 4 month window (2 months before to 2 months after) as the window for a chart pattern to appear, then a broadening bottom appeared frequently.

Patterns Before Price Doubles: Methodology

I was wondering what chart patterns appear before price makes a big move up and decided to look. I manually scanned stocks, identified where price doubled within a year, and looked for a pattern just before or just after price bottomed (leading to the double).

The process was tedious and it depended on what patterns I found before or saw now. So I automated the process and found the low price before price doubled (within a year) and checked what chart patterns a version of Patternz (my pattern finding software) found within 2 months of the start of price doubling.

The list shown in the tables below only includes patterns that Patternz can find. Some may be bogus, too, but the list gives you a sense of what patterns appear most often before a big move up.

I only show the top ten patterns, sorted by a 4-month window, 2 months before, and 2 months after price begins its move to double.

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Patterns Before Price Doubles: 4 Month Window

A broadening bottom chart pattern

This list shows the most common patterns which appear within a 4-month window (2 months before to 2 months after) price reaches a low and then doubles within a year.

The most common pattern is a broadening bottom chart pattern, which I show on the right. This one has a partial rise, but ignore that. The pattern is the two black diagonal trendlines which diverge, making the pattern look like a megaphone. Broadening bottoms appear after a downward price trend. I found that broadening bottoms either start or end within an average of 12 days of price bottoming (before going on to double).

The table shows that a broadening bottom occurs most often, but only 7% of the time in 6,705 patterns that Patternz found.

Rank and Chart PatternSamplesOccurrence
1. Broadening bottom4647%
2. V tops4597%
3. Ugly double bottom3876%
4. Pipe bottom3856%
5. Triangle, symmetrical3736%
6. Double bottom3625%
7. Triple bottom3445%
8. V bottom3025%
9. Broadening top, right-angled and ascending  2934%
10. Rectangle top2514%

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Patterns 2 Months Before Price Doubles

Ugly double bottom chart pattern

The following table lists the patterns which started or ended within 2 months of price beginning to double (and completing a double within a year). By that, I mean the start of the chart pattern, end of the chart pattern, or the time from start to end of the chart pattern (where the chart pattern spans the start date) must be within 2 months of the start of price doubling.

I show a picture of an ugly double bottom (1, 2). This is a pattern I identified years ago but not one I discuss often. It's like a traditional double bottom except that the second bottom is higher than the first one. Confirmation, where squiggles on the price chart become a valid chart pattern, occurs when price closes above the top of the ugly double bottom.

I found 4,516 chart patterns of all types which appeared (ended) within 2 months of the start of price doubling.

My spreadsheet says that ugly double bottoms appear an average of just 1 day before price begins to double. It's the chart pattern found most often, 9% of the time, compared to the other chart patterns.

Rank and Chart PatternSamplesOccurrence
1. Ugly double bottom3869%
2. Broadening bottom3818%
3. Double bottom3247%
4. Pipe bottom3167%
5. V top2606%
6. V bottom2345%
7. Triple bottom2085%
8. Rounding bottom2024%
9. Triangle, symmetrical1984%
10 (tie). Head-and-shoulders bottom  1724%
10 (tie). Cup with handle1724%

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Patterns 2 Months After Price Doubles

V-top chart pattern

The following table shows which patterns appear most often within 2 months after the start of price doubling.

V top chart patterns look like the image on the right. Price makes a swift move upward and then comes back down. If the pattern is well-behaved, it looks like that shown in the figure. Otherwise, the right side might not make it down far enough to complete the traditional V shape.

The following table shows that V tops appear most often, but only 9% of the time out of 2,190 chart patterns. They appear an average of 24 days after price bottomed on the way to doubling.

Rank and Chart PatternSamplesOccurrence
1. V tops1999%
2. Triangle, symmetrical1758%
3. Broadening top, right-angled and ascending  1587%
4. Broadening top1517%
5. Rectangle top1467%
6. Triple bottom1366%
7. Triangle, descending1085%
8. Triangle, ascending1045%
9. Broadening top, right-angled and descending  904%
10. Head-and-shoulders top864%

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Patterns Before Big Moves: Patterns Searched

Below is the list of 44 chart patterns I scanned for in this test. With so many chart patterns (the test took about 20 hours to run) and the percentages are small for those found most often (below 10%). In other words, instead of using 44 patterns, if I used only 10, you'd see a higher occurrence percentage in the preceding tables.

-- Thomas Bulkowski

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See Also

 

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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 Encyclopedia of Candlestick Charts Trading Classic Chart Patterns

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