Subscribe to RSS feeds Bulkowski Blog via RSS

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

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

Bulkowski's Predicting Trend Changes

Class Elliott Wave Fundamentals Psychology Quiz Research Setups Software Tutorials More...
Busted
Patterns
Candles Chart
Patterns
Event
Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 09/30/2014
17,043 -28.32 -0.2%
8,451 -46.98 -0.6%
551 0.50 0.1%
4,493 -12.46 -0.3%
1,972 -5.51 -0.3%
YTD
2.8%
14.2%
12.4%
7.6%
6.7%
Tom's Targets    Overview: 09/30/2014
17,500 or 16,600 by 10/15/2014
8,750 or 8,100 by 10/15/2014
530 or 570 by 10/15/2014
4,400 or 4,650 by 10/15/2014
2,025 or 1,930 by 10/15/2014
Wilder RSI: -3.0%

Written and copyright © 2009-2013 by Thomas N. Bulkowski. All rights reserved.

This article discusses how to use the apex of a triangle to predict a short-term change in the price trend.

 

Predicting Trend Changes: The Triangle Apex

The chart shows the triangle apex matching the minor high.

In the book, Elliott Wave Principle , authors Frost and Prechter write that the market often turns when price reaches the apex of a triangle.

I tested this using three methods and found it to be true in all cases. Price reaches a minor high or minor low 75% of the time within a few days of the triangle apex. Price turns from down to up or up to down 60% of the time.

As an example, the chart shows a symmetrical triangle on the daily scale. If you draw the two trendlines carefully along the top and bottom of the pattern, they converge at the triangle apex sometime into the future. Expect price to turn near the date where the trendlines join.

In this example, the triangle apex is at A and the market turns at B. Clearly the turn is not a lasting one, but price drops by 8%. It is not a trend change as much as it is a pause in the upward price trend.

 

Top

 

The chart shows an ascending triangle in Energy Conversion Devices (ENER) on the daily scale.

Predicting Trend Changes: Ascending Triangles

Not only does the triangle apex signal a reversal in symmetrical triangles, but other types of triangle patterns as well.

Outlined by two red trendlines is an ascending triangle shown in Energy Conversion Devices (ENER) on the daily scale.

The triangle apex nears the date at A, right at the formation of a minor high. Price drops from a high of $21.27 to a low of $11.83 (not shown), a plunge of 44% in just over 2 months.

 

 

The chart shows a descending triangle in Boeing (BA) on the daily scale

Predicting Trend Changes: Descending Triangles

Pictured is a chart of Boeing (BA), on the daily scale. Outlined in red trendlines is a descending triangle.

Price breaks out downward from the triangle and crashes like an airplane out of gas.

In March, when the general market began a recovery, so too did Boeing.

Price takes off, rising to A in a stair-step move higher. At A, price reaches a high of $38.68 before dropping to B, $34.21, a decline of almost 12%.

 

 

-- Thomas Bulkowski

Top 

See Also

Written and copyright © 2009-2013 by Thomas N. Bulkowski. All rights reserved. A psychiatrist is a person who will give you expensive answers that your wife will give you for free.