As of 10/29/2020
  Indus: 26,659 +139.16 +0.5%  
  Trans: 11,184 +237.90 +2.2%  
  Utils: 868 +2.32 +0.3%  
  Nasdaq: 11,186 +180.72 +1.6%  
  S&P 500: 3,310 +39.08 +1.2%  
YTD
-6.6%  
 +2.6%  
-1.3%  
 +24.7%  
 +2.5%  
  Targets    Overview: 09/29/2020  
  Up arrow29,300 or 27,400 by 11/01/2020
  Up arrow12,000 or 11,000 by 11/01/2020
  Up arrow915 or 840 by 11/01/2020
  Up arrow12,800 or 11,300 by 11/01/2020
  Up arrow3,700 or 3,400 by 11/01/2020
CPI (updated daily): Arrows on 10/23/20
As of 10/29/2020
  Indus: 26,659 +139.16 +0.5%  
  Trans: 11,184 +237.90 +2.2%  
  Utils: 868 +2.32 +0.3%  
  Nasdaq: 11,186 +180.72 +1.6%  
  S&P 500: 3,310 +39.08 +1.2%  
YTD
-6.6%  
 +2.6%  
-1.3%  
 +24.7%  
 +2.5%  
  Targets    Overview: 09/29/2020  
  Up arrow29,300 or 27,400 by 11/01/2020
  Up arrow12,000 or 11,000 by 11/01/2020
  Up arrow915 or 840 by 11/01/2020
  Up arrow12,800 or 11,300 by 11/01/2020
  Up arrow3,700 or 3,400 by 11/01/2020
CPI (updated daily): Arrows on 10/23/20

Bulkowski on Price Velocity

 

Price velocity is the speed at which price moves over time. Measured in cents per day, the speed at which price moves into a chart pattern often resumes after the breakout from the chart pattern. This page shows results from a study of velocity I conducted from August 22-25, 2005.

 

Price Velocity: Summary

I looked at 16,664 stock market chart patterns of various types using daily price data from 1991 to 2005, encompassing both bull and bear markets. I found the following.

Price Velocity: Details

The following table shows the post breakout performance of various chart patterns in bull and bear markets, when the velocity leading to the chart pattern (inbound velocity) was above (high velocity) or below (low velocity) the median velocity.

The numbers show that a high velocity move leading to the chart pattern results in superior performance after a downward breakout. Upward breakouts perform better if low velocity leads to the chart pattern.

 High velocity downtrend inboundLow velocity downtrend inboundMedian Down Velocity (cents per day)High velocity uptrend inboundLow velocity uptrend inbound Median Up Velocity (cents per day)
Bull market, down breakout19%17%621%16%6
Bull market, up breakout36%37%633% 35%5
Bear market, down breakout26%23%12 26%22%13
Bear market, up breakout26%29%1024% 25%9

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The following table shows the results of a frequency distribution of how often price showed high velocity after the breakout when compared to the velocity before the chart pattern (inbound velocity).

High velocity move post breakout and --->High downward inbound velocity Low downward inbound velocityHigh upward inbound velocityLow upward inbound velocity
Bull market, down breakout62%39%62%38%
Bull market, up breakout65%34%70%31%
Bear market, down breakout66%34%60%39%
Bear market, up breakout68%36%62%34%

For example, the upper left cell for high downward inbound velocity in a bull market after a downward breakout shows 62%. That means 62% of the time price showed a high velocity move after the breakout when the downward price trend leading to the chart pattern also showed a high velocity move. Just 38% of the time (100% - 62%) did a high velocity inbound move result in a low velocity post breakout move. The results show that a high velocity move after the breakout follows a high velocity move leading to the breakout.

Another example. The cell to the right shows a result of 39% for low downward inbound velocity and bull market, downward breakouts. That means just 39% of the time did a low velocity, downward price trend leading to the chart pattern result in a high velocity, downward post breakout move. To flip the numbers around, 61% of the time a low velocity post breakout move followed a low velocity inbound move.

Price Velocity: Definitions

The inbound velocity measures from the trend start to the start of the chart pattern. I used the average price at the trend start and the closing price at the chart pattern start. (I could have used the closing price at the trend start, but I didn't log that into my spreadsheet). The trend start is the lowest low or highest high before the chart pattern. It's the point where price changes trend by at least 20% moving backward in time. I disregarded any overshoot or undershoot a few days before the start of the chart pattern.

The outbound velocity measures from the breakout to the ultimate high or ultimate low. I used the average intraday price at the breakout (because I didn't log the closing price) to the ultimate high or ultimate low price. The ultimate high is the highest high before price drops at least 20%, measured from the highest high to the close. The ultimate low is the lowest low before price rises at least 20% measured from the lowest low to the close. The search for the ultimate high or ultimate low was stopped if price closed below the chart pattern's low (upward breakouts) or above the chart pattern's high (downward breakouts). If data ended before the ultimate high or low was found, the highest high or lowest low to that point was used.

-- Thomas Bulkowski

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See Also

 

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

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 Visual Guide to Chart Patterns Encyclopedia of Candlestick Charts Encyclopedia of Chart Patterns 2nd Edition Trading Classic Chart Patterns

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