Predict Breakout Direction (2024)

My book,Getting Started in Chart Patterns, Second Edition,pictured on the left, discusses partial rises and declines starting on page 207.

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

$ $ $

This article discusses how to predict the breakout direction from some chart patterns.

With some chart patterns, determining the breakout direction is easier than with other chart patterns. Let's take a look at broadening tops.

The chart of Apple Computer (AAPL) shows a broadening top chart pattern. There are a number of identification guidelines that help with identification. They are:

1. Price should trend up leading to the start of the pattern (if it trends downward, it's a broadening bottom).
2. The shape of the pattern should resemble a megaphone with the smaller end toward the left, wider to the right.
3. Price follows two diverging trendlines, one along the peaks and another along the valleys.
4. Price should touch each trendline at least twice.
5. Look for partial rises and declines.

The chart shows a partial decline. Once the broadening top has passed the identification guidelines (meaning only begin looking for a partial rise or decline afterpoint 2 in this case, since bottoms 4, 5, and 6 were made earlier) then watch for price to drop from the top trendline but not make it down to the lower trendline. In broadening tops,these partial decline correctly predict an immediate upward breakout 72% of the time.

In this example, the breakout was not immediate as the partial decline predicted, even though it correctly signaled an upward breakout. It took another move down before price recoveredand broke out upward.

You can review the links for more information on these pre-breakout features. You will find partial rises and declines helpful in all varieties of broadening patterns as well asrectangles and even triangles.

The following patterns show partial rises and declines

• Broadening top chart patterns.
• Broadening bottom chart patterns.
• Broadening formation, right-angled and ascending.
• Broadening formation, right-angled and descending.
• Rectangle tops
• Rectangle bottoms

-- Thomas Bulkowski

More

See Also

• Partial rises predict downward breakouts
• Partial declines predict upward breakouts.
• Confirmation. How often does buying before confirmation work?
• Yes, you can improve trading results by buying before confirmation. Here's how.
• Drawing 3 point channels. What's involved and how is it done?
• Market direction. 7 tips to determining.
• Trading cycles help time your entries and exits.
• Trend change detection using a triangle apex.

Support this site! Clicking any of the books (below) takes you toAmazon.com If you buy ANYTHING while there, they pay for the referral.
Legal notice for paid links: "As an Amazon Associate I earn from qualifying purchases."

My novels:

My stock market books:

Copyright © 2005-2024 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 Privacy/Disclaimer ☰

I may not be totally perfect, but parts of me are excellent!