As of 10/20/2020
  Indus: 28,309 +113.37 +0.4%  
  Trans: 11,860 +152.21 +1.3%  
  Utils: 881 +3.55 +0.4%  
  Nasdaq: 11,516 +37.61 +0.3%  
  S&P 500: 3,443 +16.20 +0.5%  
YTD
-0.8%  
 +8.8%  
 +0.2%  
 +28.4%  
 +6.6%  
  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 10/19/20
As of 10/20/2020
  Indus: 28,309 +113.37 +0.4%  
  Trans: 11,860 +152.21 +1.3%  
  Utils: 881 +3.55 +0.4%  
  Nasdaq: 11,516 +37.61 +0.3%  
  S&P 500: 3,443 +16.20 +0.5%  
YTD
-0.8%  
 +8.8%  
 +0.2%  
 +28.4%  
 +6.6%  
  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 10/19/20

Bulkowski's Volatility versus Performance Study

 

Volatility v. Performance: Summary

I looked at price volatility versus performance and found that rising volatility during the five days leading to the upward breakout from a chart pattern suggests better post breakout performance than falling volatility, but the difference is slight.

For downward breakouts, the results were less pronounced and reversed, with falling volatility showing better post breakout performance than rising volatility.

$ $ $

My book, Encyclopedia of Chart Patterns Second EditionEncyclopedia of Chart Patterns 2nd Edition book. pictured on the left, takes an in-depth look at 63 chart and event patterns, including performance statistics.

If you click on the above link and then buy the book (or anything) while at Amazon.com, the referral will help support this site. Thanks.

-- Tom Bulkowski

$ $ $

Volatility v. Performance: Definitions and Method

Volatility is the daily difference between the high and low prices. I used three look back periods in the test: start of chart pattern to day before breakout, 10 days, and 5 days before the breakout. I used linear regression to determine the slope of a line based on price volatility. Then I measured the rise from the breakout to the ultimate high, or the decline from the breakout to the ultimate low. The ultimate high is the highest high before a 20% price drop. The ultimate low is the lowest low before a 20% price rise. The search for the ultimate high or low ends if price moves to the side opposite the chart pattern (meaning, if price hits a stop first).

In the test, I used 45 chart pattern types (double bottoms, head-and-shoulders bottoms, and so on) in 1,275 stocks from 7/1991 to 3/2006, but few of the stocks covered the entire period. Not all stocks had useful chart patterns.

Volatility versus Performance: Detailed Results

Here are the detailed results.

5 days before breakout All PatternsFalling volatilityRising volatility
Upward breakout31.6% (11217)31.0% (5004)32.2% (6017)
Downward breakout20.8% (9866)21.2% (4504)20.6% (5132)

Each box shows the number of samples involved in the test in parentheses and the resulting rise or decline from the chart pattern after the breakout. The 5-day look back appears to be the best measure of volatility versus post breakout performance (compared to a 10-day look back or from the start of the chart pattern to the day before the breakout).

For example, a stock showing rising volatility has an average rise of 32.2% after an upward breakout. A stock with falling volatility rises an average of 31.0%. Downward breakouts show that chart patterns with falling volatility tend to outperform, 21.2% versus 20.6%.

-- Thomas Bulkowski

Top of page More

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

Copyright © 2005-2020 by Thomas N. Bulkowski. All rights reserved.
Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.
Some pattern names are registered trademarks of their respective owners.

Home Advertise Contact Donate Links Privacy/Disclaimer

A day or firm decisions! Or is it?Smiley