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Written by and copyright © 2005-2011 by Thomas N. Bulkowski. All rights reserved.
Extended V tops and extended V bottoms are chart patterns that are easy to spot after they have completed. They appear just like
their names suggest, V-shaped or inverted V-shaped price patterns on the chart.
Extended V Tops
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Identification Guidelines
| Characteristic | Discussion |
| Uptrend | Look for price to make a straight-line run upward with few or no pauses, often fitting inside a channel (two parallel trendlines). |
| Reversal | Price at the top of the inverted V will form a one-day reversal, island reversal, or tail, usually on heavy volume. |
| Trendline | After the reversal, price pierces an up-sloping trendline drawn along the price lows, confirming the trend change. |
| Downtrend | Price trends down, usually at the mirror angle of the uptrend. If price climbed by 45 degrees, price will tumble following a 45 degree trend. |
| Extension | The extended V top is a variation of the V top. After price reverses at the top, price forms a flag or pennant
pattern – a sideways price move that often swings upward against the downward price trend. Once the flag completes, price resumes the decline. |
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Trading Tips
Trading an extended V top
is easier than trading a regular V top. When price breaks out of the flag or
pennant in the extended portion of the inverted
V, take a position. For downward breakouts, expect price to approach the
price
level of the start of the inverted V on the left. It may not reach the exact bottom,
so be prepared to exit early.
Example
The above figure shows an example of an extended V top chart pattern. Price
begins the advance to the summit in early June and peaks near July. A black candle
signals a reversal followed by the extension in a small congestion region that
slants upward. Once the stock pierces the bottom of this region, price tumbles,
approximating the angle at which price climbed to the V top.
Extended V Bottoms
Identification Guidelines
Many of the identification guidelines are similar to the extended V top.
| Characteristic | Discussion |
| Downtrend | Look for price to make a straight-line run downward with few or no pauses, often fitting inside a channel. |
| Reversal | Price at the bottom of the V will form a one-day reversal, island reversal, or tail, usually on heavy volume, perhaps gapping upward. |
| Trendline | After the reversal, price pierces a down-sloping trendline drawn along the price tops, confirming the trend change. |
| Uptrend | Price trends up, usually at the mirror angle of the downtrend. If price dropped by 30 degrees, price will rise following a similar angle. |
| Extension | The extended V bottom is a variation on the V bottom. After price reverses at the bottom, price forms a
flag or pennant pattern – a sideways price move that often swings downward against the prevailing upward price
trend. Once the flag completes, price resumes the rise. |
Trading Tips
Trade an extended V bottom
once price exits the flag or pennant. Expect price to approach the price level of
the left side of the V (where the decline
started).
Example
The above figure shows an example of an extended V bottom chart pattern. The
decline into the pattern is unusually steep, meaning it cannot last long, and it
doesn't. Price rebounds in a V-shape and then levels out, forming the extension.
The extension appears on the chart as a descending triangle -- a flat base with
down-sloping top. The breakout from this congestion pattern is upward and that means
a powerful move up, retracing much of the drop leading into the V bottom.
-- Thomas Bulkowski
Copyright © 2005-2011 by Thomas N. Bulkowski. All rights reserved. Shin: A device for finding furniture in the dark.
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