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Written and copyright © 2011 by Thomas N. Bulkowski. All rights reserved.
To have this page titled, "Bulkowski's Swing Rule" sounds disingenuous since it's not my swing rule, but Stan Weinstein's.
Back in mid March, I posted a blog entry about Weinstein's swing rule. I have new results about how often it works.
Refer to the adjacent figure. Briefly, the drop from A to B is the same as the rise from D to C, according to Weinstein. Point D is the same price as A.
Swing Rule Testing Methodology and Results: Up Swings
How often does this work?
I cataloged the stair step climbs from the start of the 2000 bear market, March 24, 2000, until May 3, 2011 in over 925 stocks, finding from 24,587 samples (for down swings) to
32,035 up swings. The up swing variety is shown in the figure. The down swing would be a stair-step decline.
I measured how close peak C came to the predicted target. For up swings, the stock was within 5% (plus or minus) of the target 83% of the time. Small swings (a decline less than 10%
from A to B) are more accurate than larger declines. Small swings are within 5% of the target 86% of the time.
Swing Rule Testing Results: Down Swings
For downward stair-step patterns, small swings also excel at creating a good price target. It works 88% of the time in a bull market.
Thus, if you want a reliable way to measure how far price is going to rise or drop, calculate the decline from A to B and add it to A for an upward target. For downtrends, you'd do
a similar calculation for the projected decline.
-- Thomas Bulkowski
Written and copyright © 2011 by Thomas N. Bulkowski. All rights reserved. One-at a time dispensers, don't.
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