Bulkowski on Right-Angled and Descending Broadening Formations

BMY (Bristol Myers Squibb, from 14 May 2007 to 5 June 2007). This RABFD had no overhead resistance at least none shown on this chart (except for round number). So price was clear to rise. The stock broke out downward and then busted the breakout when price climbed above the top of the chart pattern. Unfortunately, in this case, the stock didn't rise much before finding the ultimate high and tumbling.

CHD (Church & Dwight from 27 November 2015 to 23 December 2015). This is similar to the prior chart but I wanted to show a second example. This RABFD has little overhead resistance but it forms as part of a multipeak pattern (this chart is actually at the top of an upward move). The stock breaks out downward, reverses, and busts the breakout when it soars out the top. In this example, the stock makes a good climb, but only a portion of it shows here. It peaked at 53.

Be careful taking a position in a stock with a fast rise like that shown at A. This one works, but...

BLL (Ball Corporation symbols is now BALL from 8 August 2016 to 6 September 2016). This chart shows one of two variations of a fast rise where price goes vertical either before the chart pattern (like that shown here) or within it. The rise following the breakout fails and the stock drops. A fast rise for the RABFD and failure happens a lot with this chart pattern.

BAX (Baxter International from 8 September 2021 to 13 December 2021). This is another example of a fast rise but this rise happens at the end of the chart pattern. Starting from C, the stock makes a sharp move higher to A. I expected it to stall there, and it did, but didn't hang out long. The stock continued higher for a few more points before reversing and closing below the bottom of the chart pattern, busting the upward breakout and likely leading to a failed trade. Notice the fast move at B, suggesting this chart pattern would struggle.

This is a chart of CACI (CACI International from 2 February 2007 to 8 March 2007). The stock gaps lower in an event pattern called a dead-cat bounce. After the drop ended, there wasn't much of a bounce. These types of drops happen from time to time in stocks but what traders need to remember is that if one happens, others can happen again. Those events center around earnings misses. Every three months there's a chance of another big drop (probability of it happening: 26% in 3 months, 38% in 6 months). This DCB triggered an entry on the top of the pattern and price stopped out the trade below the pattern, as shown. Because of the DCB, avoid trading this stock at least for 6 months.

BAX (Baxter International from 26 April 2007 to 5 June 2007). This is an example of a failed trade that happens after a long uptrend. Although some uptrends last for years, perhaps as long as a decade, they are rare. In this case, how much longer will the uptrend last? Answer, the stock reverses just after entering a trade.

BRC (Brady Corp, from 22 April 2014 to May 12 20140). Overhead resistance, if you figure out where it will appear, can make or break a trader. In this chart, we see a RABFD appear after a long downtrend. That's not a good start because these downtrends often last longer than one would expect. However, a stock will turn upward sooner or later. In this case, the stock broke out downward, reversed, and soared out the top of the chart pattern. The new breakout upward busted the downward breakout and suggested a good move higher. However, overhead resistance put the brakes on the rise. The stock reversed at the blue line and tumbled.

BA (Boeing from 6 October 1994 to 20 October 1994). This small RABFD appears to rest on support and makes for a good upward move reaching 60 in 1997.