Friday 12/4/09. Pattern Trading Setups for the Weekend.

The following message is computer generated, is experimental, and not a comment by Mr. Bulkowski.

There were 37 chart patterns found this week (except for horns and pipes which appear on the weekly scale, so I give them more time) out of 674 stocks searched, or 5.5%. Based only on the percentage of chart patterns found, and excluding pipe bottoms (treated separately), the market is trending since few consolidation patterns (chart patterns) appear. Strongly trending markets (straight-line runs with little overlap from price bar to price bar) dampen the appearance of chart patterns, but individual stocks will consolidate from time to time, allowing chart patterns to form.

Excluding ETFs (some of which short the market, so a bullish pattern there is actually bearish), there were 18 bullish chart patterns this week and 6 bearish ones with any remaining (2) being undecided. Based on the comparison of bullish to bearish patterns only, this suggests the market is hinting of a coming bullish (up) turn.

If a high and tight flag appears in the list, the start and end dates highlight the flagpole (a near double in price) and not the complete chart pattern (that is, it does not include the flag).

The following table shows the security symbol and type of chart pattern, including the start and end date of the chart pattern. Use the dates to help locate the pattern on your chart. The information can serve as a starting point in your hunt for a promising trade using chart patterns.

The following tips may help.

  • Look for patterns with unusual breakout directions, such as an ascending triangle with a downward breakout. The unusual breakout direction can suggest a strong run.
  • Busted patterns, where price breaks out in one direction, turns around and then breaks out in the opposite direction can lead to powerful moves.
  • Throwbacks and pullbacks occur about half the time, so be prepared for a retrace after the breakout.
  • Look for underlying support and overhead resistance to help gauge how far price will move after the breakout.

Good luck. -- Thomas Bulkowski