As of 12/07/2022
  Indus: 33,598 +1.58 +0.0%  
  Trans: 13,768 -130.21 -0.9%  
  Utils: 973 -6.18 -0.6%  
  Nasdaq: 10,959 -56.34 -0.5%  
  S&P 500: 3,934 -7.34 -0.2%  
YTD
-7.5%  
-16.4%  
-0.8%  
-30.0%  
-17.5%  
  Targets    Overview: 12/01/2022  
  Up arrow35,500 or 32,800 by 12/15/2022
  Down arrow13,400 or 14,500 by 12/15/2022
  Up arrow1,000 or 925 by 12/15/2022
  Up arrow12,000 or 10,600 by 12/15/2022
  Up arrow4,250 or 3,850 by 12/15/2022
CPI (updated daily): Arrows on 12/5/22
As of 12/07/2022
  Indus: 33,598 +1.58 +0.0%  
  Trans: 13,768 -130.21 -0.9%  
  Utils: 973 -6.18 -0.6%  
  Nasdaq: 10,959 -56.34 -0.5%  
  S&P 500: 3,934 -7.34 -0.2%  
YTD
-7.5%  
-16.4%  
-0.8%  
-30.0%  
-17.5%  
  Targets    Overview: 12/01/2022  
  Up arrow35,500 or 32,800 by 12/15/2022
  Down arrow13,400 or 14,500 by 12/15/2022
  Up arrow1,000 or 925 by 12/15/2022
  Up arrow12,000 or 10,600 by 12/15/2022
  Up arrow4,250 or 3,850 by 12/15/2022
CPI (updated daily): Arrows on 12/5/22

Bulkowski on Pattern Pairs: Descending Triangles

Initial release: 11/26/2021.

The idea behind pattern pairs is to pick a chart pattern type (like broadening bottoms with upward breakouts) to buy and another to sell (like double tops). You buy the upward breakout from the broadening bottom, hold for a few years, and sell when a double top appears and breaks out downward. Along the way, you give price a chance to rise far enough to overcome those trades which are stopped out for a loss. This is a trend-following strategy.

Trading Descending Triangles: Summary

Picture of the pattern pairs.

The figure illustrates the idea for trading pattern pairs, where price is the red line and the boxes are chart patterns. This articles assumes you buy an upward breakout from either a descending triangle or a busted descending triangle (price breaks out downward, drops no more than 10%, reverses, and closes above the top of the descending triangle). Buy as price rises above the top of the descending triangle.

On the sale side, you can sell the first bearish chart pattern which comes along or wait for your favorite bearish chart pattern to appear and sell then.

Here's a list of the top five performing sell signals, based on annualized gain (annualized because the hold time is often years, in parenthesis).

Sell a...

The following list shows the expected performance of chart pattern pairs, ranked by their expectancy. Expectancy is a way of gauging winning and losing trades and how much money you might make trading a pattern pair. I put the expected profit per trade, per share, in parenthesis.

Sell a...

Trading using a busted chart pattern results in worse performance than using non-busted patterns (at least for descending triangles as the buy signal).

To improve performance, try these tips.

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Trading Descending Triangles: Entry and Exit Conditions

The databases I built over several decades doesn't identify every chart pattern. There may be plenty of double tops over the years, for example, that I didn't catalog on the way to the one I did catalog. So buying an upward breakout from a descending triangle and selling at the double top I cataloged would be different than choosing to sell a different double top. However, the following analysis does give a real-world flavor for how well you might do trading chart patterns if you follow the pattern pair strategy.

Here's what I used in my analysis.

I used the following 43 chart patterns in the analysis, but some only applied if they were busted.

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Trading Descending Triangles: Stops

I used a stop loss order set a penny below the bottom of the descending triangle. Price on the way down may have gapped below the stop price (for the sale price), so I used the lower of the stop price or the opening price on the day of sale).

For trailing stops, I removed the stop loss order and used a trailing stop set at 10%, 15%, 20%, or 25% below a peak, never lowering the stop value, but raising it if a higher peak came along during the trade.

In Table 1, I calculated the percentage net gain (the average of gains and losses) when using various trailing stop loss amounts (10%, 15%, 20%, and 25%) for all tested chart patterns according to the busted/non-busted buy/sell configuration. In parenthesis is the size of the average loss so I could detail how losses change with various stop loss orders.

For example, if I tested non-busted descending triangles and sold various non-busted patterns (ascending triangles, broadening tops, head-and-shoulders tops, and so on), I made an average of 32% ("Stop Loss Only" column) after having a stop loss order in place. Losses averaged 8%. Replacing the stop loss with a 10% trailing stop cut the gain to 6% but also trimmed the average loss to 5%. Using a 25% trailing stop allowed me to keep more money, 18%, but losses climbed to 14%. If I didn't use any type of stop, the gain averaged 76% with losses averaging 31%.

The results show that:

Table 1: Various Trailing Stop Settings: Net Profit and (Average Loss)
Data 10%  15%  20%  25%  Stop Loss 
Only
 No Stop
Non-busted buys, non-busted sales 6% (-5%)  8% (-8%)  13% (-11%)  18% (-14%)  32% (-8%)  76% (-31%) 
Busted buys, non-busted sales 7% (-6%)  9% (-7%)  13% (-10%)  14% (-12%)  15% (-10%)  71% (-27%) 
Non-busted buys, busted sales 5% (-5%)  8% (-7%)  13% (-10%)  17% (-14%)  29% (-7%)  70% (-27%) 
Busted buys, busted sales 6% (-6%)  8% (-7%)  14% (-10%)  15% (-12%)  17% (-10%)  77% (-26%) 

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Trading Descending Triangles: Busted Patterns

Trading using a busted chart pattern often results in worse performance than using non-busted patterns (at least for descending triangles as the buy signal).

Table 2 shows what I found when comparing the performance of non-busted patterns (both buy and sell) with busted and non-busted chart patterns. In 22 or 31 contests (22 or 31 different chart pattern types, depending on which apply), I compared the three combinations of busted and non-busted buy and sell signals to non-busted buy and sell signals. The table below shows the percentage of time the busted combination beat the non-busted combination in the contests.

For example, I found that busted patterns won 27% (or 6) of the 22 contests when trading using a busted pattern for the sale.

Table 2: Busted or Non-Busted Contest Winners
 Sell Non-Busted PatternSell Busted Pattern
Buy non-busted patternN/A (benchmark)27%
Buy busted pattern13%27%

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Trading Descending Triangles: Non-busted Buy, Non-Busted Sale

Picture of a busted pattern pair.

Table 3 shows statistics I collected for descending triangles using the trading rules described above and shown in the figure. A stop loss order was used and priced a penny below the bottom of the descending triangle (after buying).

For example, if you were to buy the upward breakout from a descending triangle chart pattern and hold it until you encountered a broadening bottom (the first chart pattern listed in the table), but one with a downward breakout, you'd net an average of 47% on the 183 (40 winners, 143 losers) trades. That's an average of 239% on your winners, 7% average loss on your losers, and holding onto the position an average of 1.9 years. You'd find that only 22% of the trades made money but you'd gain an average of 24% per year (ranking 17th where 1 is best). If you removed the stop loss order and just held on until the broadening bottom with a downward breakout appeared, you'd make an average of 75% per trade.

The expectancy averages $2.18 per share per trade which ranks 46th where 1 is the best value.

Notes: All of the above numbers appear in the table except for the average hold time. The rank is based on the net gain for all four performance tables (tables 3 to 6) shown below.

Table 3: Statistics for descending triangles
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank
Broadening bottom239%-7%47%24%1775%40/14322%$2.1846
Broadening top175%-8%38%24%1793%84/25225%$6.3714
Broadening formation, right-angled and ascending73%-7%9%8%6746%36/14520%$0.9267
Broadening formation, right-angled and descending101%-8%16%12%5255%28/9822%$0.6471
Broadening wedge, ascending156%-9%46%38%580%32/6533%$3.0231
Broadening wedge, descending95%-9%11%9%6353%16/6719%$0.3275
Bump-and-run reversal top202%-8%65%44%2112%118/22235%$7.396
Diamond bottom123%-9%17%17%3438%10/4020%$0.8068
Diamond top108%-8%33%23%2080%36/6635%$5.5815
Adam & Adam double top258%-7%44%28%11128%140/58219%$5.4118
Adam & Eve double top177%-8%24%17%3489%64/30417%$2.4340
Eve & Adam double top260%-7%48%29%9121%81/31121%$6.9210
Eve & Eve double top238%-8%44%29%9103%90/33321%$7.029
Falling wedge71%-8%6%5%837%17/7818%-$0.7389
Head-and-shoulders top165%-8%27%19%2975%247/99120%$3.0132
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank
Head-and-shoulders, complex top106%-8%18%16%3844%50/16623%$1.0864
Rectangle top147%-7%22%19%2956%37/15819%$2.9533
Rising wedge153%-8%31%22%2275%86/26924%$4.3523
Rounding top209%-8%44%25%1568%40/12624%$5.5815
Ascending scallop75%-9%11%13%4952%19/5924%$1.5155
Descending scallop160%-9%27%21%2462%99/36821%$1.2361
Scallop, inverted and ascending358%-7%94%50%1152%15/3928%$17.661
Scallop, descending and inverted168%-9%37%25%1554%75/21726%$2.8336
Triangle, ascending117%-8%24%18%3258%58/17225%$2.9234
Triangle, descending123%-8%26%21%2447%64/18725%$0.6770
Triangle, symmetrical181%-8%30%24%1752%140/57220%$2.3842
Triple top175%-8%29%18%3284%201/79020%$3.6227
Rectangle bottom60%-8%-1%-1%94-5%18/14111%-$1.5495
3 falling peaks179%-8%28%21%2457%159/67719%$4.3822
Roof96%-7%16%12%5256%14/4823%$2.9035
Roof, inverted215%-8%49%33%886%35/7326%$4.6820
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank

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Trading Descending Triangles: Busted Buy, Non-Busted Sale

Picture of a busted pattern pair.

The figure shows the setup for this scenario. When price busts the bearish chart pattern (downward breakout from a descending triangle in a bull market), buy. Sell after a downward breakout from the target chart pattern.

Table 4 shows the performance of busted descending triangles for the entry and sales after downward breakouts from various bearish chart patterns. A stop loss order was used and priced a penny below the bottom of the descending triangle (after buying).

A busted descending triangle has a downward breakout but price drops no more than 10% before reversing and moving above the top of the descending triangle. Buy when price moves at least a penny above the top of the busted descending triangle. Sell after price drops at least a penny below the target chart pattern.

For example, buying a descending triangle with a busted downward breakout in a bull market (the entry price is really the higher of a penny above the top of the triangle or the opening price) and selling after the downward breakout from a broadening bottom shows winners averaging gains of 75%. Losses average 10%, for a net of 11%. Only 72 trades occurred with a win/loss ratio of 25%. This scenario ranks the annualized net gain as 76th among the four tables. If you traded this as a buy-and-hold position, meaning no stops were used, the net gain climbed to 54%. Expectancy was $0.28 per share, ranking 77th where 1 is best.

Trades with sample counts below 30 are not ranked.

Table 4: Statistics for Busted Buys, Normal Sales
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank
Broadening bottom75%-10%11%6%7654%18/5425%$0.2877
Broadening top89%-9%15%13%4979%22/6824%$0.3874
Broadening formation, right-angled and ascending52%-9%4%4%8644%16/5622%-$1.3094
Broadening formation, right-angled and descending81%-10%16%47%6/1529%
Broadening wedge, ascending35%-9%-2%-3%9715%8/3817%-$1.0492
Broadening wedge, descending36%-9%3%5%7/1927%
Bump-and-run reversal top66%-9%18%16%3848%49/8936%$2.6737
Diamond bottom134%-13%30%68%5/1229%
Diamond top53%-9%16%14%4564%23/3341%$1.6153
Adam & Adam double top167%-9%26%16%38105%48/19220%$5.4717
Adam & Eve double top97%-10%10%7%7188%21/8919%$0.7269
Eve & Adam double top86%-10%13%7%71100%29/9224%$2.3443
Eve & Eve double top113%-10%18%12%5299%31/10423%$3.5928
Falling wedge80%-8%7%6%7619%7/3417%-$0.1483
Head-and-shoulders top107%-10%17%11%5779%93/30523%$2.4340
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank
Head-and-shoulders, complex top75%-10%23%19%2945%27/4239%$2.2445
Rectangle top74%-10%9%6%7676%12/4222%$0.5972
Rising wedge68%-10%6%5%8369%22/8521%$0.3176
Rounding top111%-11%17%8%6768%13/4323%$1.0665
Ascending scallop101%-7%35%28%1140%14/2239%$1.8051
Descending scallop77%-10%17%11%5777%56/12531%$1.3258
Scallop, inverted and ascendingNone-10%-10%143%0/100%
Scallop, descending and inverted69%-10%16%11%5732%30/6233%$1.8150
Triangle, ascending53%-10%4%3%8844%19/6622%-$0.1182
Triangle, descending75%-8%18%13%4945%25/5531%$1.3657
Triangle, symmetrical99%-10%14%11%5766%40/14022%$3.3329
Triple top85%-10%14%9%6373%73/21825%$1.7952
Rectangle bottom55%-10%-1%-1%948%5/3114%-$2.7498
3 falling peaks74%-11%10%6%7691%56/17025%$1.2959
Roof55%-6%6%30%3/1319%
Roof, inverted34%-9%-1%-1%9458%7/2820%-$0.6488
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank

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Trading Descending Triangles: Non-busted Buy, Busted Sale

Picture of a busted pattern pair.

The figure shows an example of how this trade unfolds.

A bullish chart pattern appears and you buy at the breakout. Continue holding until your selected chart pattern appears. The chart pattern is bullish because it has an upward breakout but then things go wrong. Price reverses. Sell when the stock dips below the bottom of the chart pattern (meaning it busts the upward breakout).

Table 5 shows the performance statistics for this setup (buying a normal descending triangle and selling only after a busted chart pattern appears). A stop loss order was used and priced a penny below the bottom of the descending triangle (after buying).

For example, buying a descending triangle with an upward breakout in a bull market and selling a busted broadening bottom shows winning trades making an average of 32%. Losing trades lost 8%, giving a net loss of 4%. The annualized gain is also 4% in this case, giving the setup a rank of 98 (where 1 is best). If you traded this without a stop, the net gain climbed to 21%. Of the stocks I looked at, I found 72 trades with 10% of them winning. Expectancy was a loss of $1.18 per share, ranking 93rd where 1 is best. A negative expectancy means you'll be hard pressed to make money trading this pair often.

Trades with sample counts below 30 are not ranked.

Table 5: Statistics for Normal Buy, Busted Sale
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank
Broadening bottom32%-8%-4%-4%9821%7/6510%-$1.1893
Broadening top133%-8%24%15%4274%40/14122%$2.6438
Broadening formation, right-angled and ascending177%-7%7%6%7649%5/647%-$0.5586
Broadening formation, right-angled and descending62%-7%2%3%8825%11/7014%-$0.2484
Broadening wedge, ascending132%-9%33%110%8/1930%
Broadening wedge, descending48%-10%5%4%8624%9/2725%$0.0780
Bump-and-run reversal bottom63%-6%8%5%8330%9/3520%$1.0963
Cup with handle55%-7%9%9%5/1426%
Diamond bottom120%-7%14%9%6323%5/2517%$4.6221
Diamond top228%-6%50%28%1184%15/4724%$13.862
Adam & Adam double bottom249%-7%38%20%27120%39/18318%$3.0430
Adam & Eve double bottom228%-8%34%23%2065%23/10518%$7.995
Eve & Adam double bottom128%-9%19%10%6195%21/8520%$6.5113
Eve & Eve double bottom165%-6%26%14%4564%24/10419%$6.5411
Falling wedge242%-7%69%38%583%15/3431%$7.317
Head-and-shoulders bottom179%-7%37%20%2767%57/18623%$5.1319
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank
Head-and-shoulders complex bottom55%-8%4%3%8852%7/3019%-$0.5586
Rectangle top345%-8%34%35%767%13/9612%$0.1479
Rising wedge310%-8%74%42%3116%15/4326%$6.5212
Round bottom60%-7%9%14%3/1023%
Rounding top184%-8%36%53%3/1023%
Ascending scallop47%-7%7%8%6754%17/5025%$0.2278
Descending scallop30%-8%-6%-8%9917%2/306%-$2.5897
Scallop, inverted and ascending107%-5%25%15%4273%25/6627%$4.0224
Scallop, descending and inverted169%-8%30%17%3469%6/2221%$0.4773
Triangle, ascending64%-7%10%8%6735%23/7424%$1.0566
Triangle, descending114%-8%21%14%4556%21/6624%$1.2660
Triangle, symmetrical131%-8%20%15%4268%70/27620%$1.4856
Triple bottom257%-7%47%28%1197%60/23320%$9.504
Rectangle bottom93%-8%6%6%7622%10/5914%$0.0381
3 rising valleys337%-7%65%39%489%34/12921%$12.313
Roof228%-7%72%79%5/1033%
Roof, inverted80%-7%15%12%5229%9/2725%$2.1846
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank

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Trading Descending Triangles: Busted Buy, Busted Sale

Picture of a busted pattern pair.

Table 6 shows the last combination of trading statistics. It shows busted descending triangles as the entry signal and various busted chart patterns as the exit signal. Keep in mind that some trades were few. A stop loss order was used and priced a penny below the bottom of the descending triangle (after buying).

The associated figure shows the setup.

For example, buying and selling a busted broadening top (second data line in the table) made 117% from the winners, lost 10% on the losers for a net gain of 23%. Annualized, it was 17%. The net gain placed the performance of this setup at 34th, where 1 is best. Removing stops from the trades allowed them to make 83%. Only 43 trades were taken and 26% of them were winners. Expectancy was a gain of $3.80 per share, ranking 25th among the four tables.

Trades with sample counts below 30 are not ranked.

Table 6: Statistics for Busted Buys and Sales
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank
Broadening bottom42%-8%0%0%9231%2/1017%
Broadening top117%-10%23%17%3483%11/3226%$3.8025
Broadening formation, right-angled and ascending14%-12%-7%19%2/1017%
Broadening formation, right-angled and descending148%-8%35%72%6/1627%
Broadening wedge, ascending41%-19%1%161%1/233%
Broadening wedge, descending106%-9%0%51%1/128%
Bump-and-run reversal bottom35%-9%-5%29%1/109%
Cup with handle45%-12%-3%0%2/1115%
Diamond bottom275%-11%99%100%5/838%
Diamond top155%-9%23%104%4/1719%
Adam & Adam double bottom265%-10%27%14%45115%11/7113%$2.5639
Adam & Eve double bottom171%-11%16%9%6396%8/4515%$1.9049
Eve & Adam double bottom65%-9%4%2%9178%6/2818%-$0.3485
Eve & Eve double bottom42%-11%-1%0%9236%6/2420%-$0.9491
Falling wedge11%-9%-6%210%2/1413%
Head-and-shoulders bottom145%-9%34%16%3859%21/5428%$3.6326
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank
Head-and-shoulders complex bottom130%-6%36%57%4/931%
Rectangle top52%-12%7%7%7145%10/2429%-$0.7490
Rising wedge3%-9%-7%129%3/1914%
Round bottomNone-15%-15%3%0/50%
Rounding top207%-6%65%69%1/233%
Ascending scallop88%-9%6%6%7634%5/2716%-$1.6996
Descending scallop3%-8%-7%44%1/910%
Scallop, inverted and ascending73%-8%10%85%6/2122%
Scallop, descending and inverted38%-9%0%108%2/820%
Triangle, ascending66%-10%13%10%6140%10/2330%$1.1662
Triangle, descending176%-11%44%22%22101%9/2229%$7.308
Triangle, symmetrical109%-9%19%12%5264%25/8024%$2.3244
Triple bottom97%-9%12%7%7183%14/5520%$1.5254
Rectangle bottom64%-8%10%33%3/925%
3 rising valleys81%-11%17%7%71112%12/2731%$2.0848
Roof121%-9%41%132%5/838%
Roof, inverted15%-13%-7%88%1/420%
Sell PatternAverage
Win
Average
Loss
NetAnnualized
Net
RankNo Stop
Net
Win/Loss
Samples
Win
Loss
Average
Expectancy
Expectancy
Rank

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Trading Descending Triangles: Performance Improvements

Here are a few ideas the data suggested which may improve performance of your pattern pairs trading.

Trend Start: Short, Medium, or Long

Find the trend start for your descending triangle. Often you can just look at a chart and see where the trend begins. If not, or you want to be sure, then the glossary describes how to find it.

Determine the length from the trend start to the pattern's start: short term (less than 3 months), medium term (3 to 6 months) or long term (more than 6 months).

Table 7 shows the results for the four combinations of busted/non-busted trades and the resulting performance.

Buying patterns with a short-term (up to 3 months) duration from the trend start to the pattern's start results in significantly better performance in most cases.

Notice that busted buy patterns (bottom row in the table) underperform non-busted buys in most cases. Don't trade a busted descending triangle.

Table 7: Short (S) Medium (M) or Long (L) Trend Start and Performance
 Sell Non-Busted PatternSell Busted Pattern
Buy non-busted patternS36% M41% L17%S39% M32% L9%
Buy busted patternS19% M11% L6%S21% M8% L14%

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Moving Averages: 50- and 200-Day SMA

I checked two moving averages at buy time, 50- and 200-day simple moving averages (not as a crossover setup). I compared the breakout price to the value of the moving average. Table 8 shows the performance of buying or selling busted or non-busted patterns when the breakout price was above (A) or below (B) the 50-day simple moving average (SMA).

Notice that buying non-busted patterns outperformed buying busted ones (compare the two rows). I found that buying a non-busted triangle when the breakout price was above the moving average resulted in better performance than if the buy price was below the SMA.

Table 8: Above (A) Below (B) 50-Day Simple Moving Average
 Sell Non-Busted PatternSell Busted Pattern
Buy non-busted patternA36% B23%A32% B23%
Buy busted patternA16% B8%A21% B3%

Table 9 shows the results of using a longer moving average, the 200-day. Traders often use this as a proxy for the long-term trend.

Non-busted patterns beat the performance of busted patterns (compare the two rows). Buying non-busted triangles worked best if the breakout price was above the 200-day SMA. Busted patterns (bottom row) did slightly better if the breakout price was below the 200-day SMA at buy time.

Table 9: Above (A) Below (B) 200-Day Simple Moving Average
 Sell Non-Busted PatternSell Busted Pattern
Buy non-busted patternA33% B28%A30% B27%
Buy busted patternA14% B17%A17% B19%

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Selling First Bearish Chart Pattern

The prior discussion assumes you buy a descending triangle (busted or non-busted) but sell a chart pattern of your choosing, such as a downward breakout from a head-and-shoulders top (you wait for one to appear). What if you sold the first bearish chart pattern which comes along? How would you do?

Table 10 shows the results sorted by the type of patterns involved (busted or non-busted). For example, if you buy a non-busted descending triangle and sell the first non-busted chart pattern which comes along, you'd make 16% on average. Annualized, you'd make 43%. This compares to a 22% annualized gain if you sell a designated pattern (like you waited for a double top before selling, which may or may not be the first bearish chart pattern to come along).

The best results come from buying and selling non-busted patterns. You'll want to avoid selling busted patterns.

The bottom half of the table shows expectancy for the four combinations. The highest expectancy associates with buying and selling non-busted patterns.

Table 10: Selling the First Bearish Pattern (Annualized)
 Sell Non-Busted PatternSell Busted Pattern
Buy non-busted pattern16% (43% v 22%)2% (6% v 19%)
Buy busted pattern9% (26% v 10%)0% (0% v 10%)
Expectancy (Below)
 Sell Non-Busted PatternSell Busted Pattern
Buy non-busted pattern$2.10$0.66
Buy busted pattern$1.36$-0.96

-- Thomas Bulkowski

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