Technical Chart Patterns Characteristics

TOP TEN BULLISH AND BEARISH CHART PATTERNS
Page 1 of 10
TECHNICAL CHART PATTERNS CHARACTERISTICS

Obtained from the book by Thomas N. Bulkowski, Encyclopedia of Chart
Patterns
Note! Most technical Analysis chart patterns typically

occur slowly over a 3 months to 4 months time span.
Therefore, you should only
seriously use a weekly chart profile setting and at
least
one-years worth of weekly time plots. .
TOP 10 BULLISH TECHNICAL
CHART FORMATIONS WITH
HIGHEST MOST LIKELY RISE!
1. Rounding Tops
2. Broadening Formations, Right
Angled
& Descending
3. Scallops, Ascending
4. Head-and-Shoulders Bottoms,
Complex
5. Horn Bottoms
6. Head-and-Shoulders Bottoms
7. Double Bottoms
8. Wedges, Falling
9. Rectangle Top, Up Breakout
10. Flags, High and Tight
AVG. RISE
AVG.
%
FAILURES %
LIKELY
RISE %
6%
41%
30%
19%
27%
25%
25%
33%
25%
6%
37%
25%
11%
5%
3%
2%
2%
17%
37%
38%
40%
43%
52%
63%
25%
25%
25%
25%
25%
25%
TOP 10 BEARISH TECHNICAL

AVG.
LIKELY
AVG.
CHART FORMATIONS WITH
DECLINE % DECLINE%
FAILURES
%
HIGHEST MOST LIKELY DECLINE!
34%
17%
25%
1. Pennant, trend down
2. Scallops, Descending
3%
24%
20%
3. Head-and-Shoulders,
8%
27%
20%
Tops, Complex
4. Diamond Tops
25%
21%
20%
5. Broadening Wedges,
41%
24%
20%
Descending,
Down Breakout
6. Rectangle Tops, Down
0%
20%
20%
Breakout
7. Broadening Bottoms,
6%
27%
17.5%
Down Breakout
8. Bump-and-Run Reversal Tops
19%
24%
17.5%
9. Broadening Tops, Down
4%
23%
15%
breakout
10.Triangles, Descending
4%
19%
15%
http://www.coveredcallswins.com/chartpatterns/BestBullish&BearishPatterns.html
11/15/2004
Page 2 of 10
PATTERN CHARACTERISTICS
#1 Bullish! One of
the most bullish and
dependable chart
pattern with only a
6% failure rate and
an average positive
rise of 41%. The
average rise was
30%. These pattern
chart formations are
often long enough to
appear on the
weekly charts and
daily charts.
Trading Tactics The average trade
for entry should
occur on the right
side of the dome
when the price
closes above the
dome or at crest for
the more aggressive
investors.
Pattern Shape Rounded halfmoon shape. The

stock price trend
curves beginning
from the lower left
price point upward
to the top of the
dome then the
price trend rounds
over and moves
down again to a
lower price support
area.
WINs -This
pattern has an
upward bias and is
ideal for writing
covered calls
and/or leaps
spreads. It is
possible to time
your writes and get
higher premiums
for your writes.
Legging into a
spread would be
more aggressive.
#2 Bullish! Contrary
to popular belief,
more chart pattersn
with right-angled
descending
broadening
formations break out
upwards than
downwards.
Trading Tactics The upper price
Pattern Shape Looks like a

megaphone, tilted
downward, with the
top the formation
horizontal & bound
on the bottom by a
down ward biased
sloping trendline.
WINs - This
pattern works great
11/15/2004
Page 3 of 10
tags must form a

horizontal line.
There is no
consistent volume
pattern for this
formation. Note!
Prices can break
out in either
direction, usually
with a rise in
volume that soon
tapers off.
with determining the

strike prices for CCs
and LEAPs spreads.
The back and forth
movements make the
option premiums
higher.Watch out for
the third and fourth
upmove to gapping
prices!
Pattern Shape Ascending

formations have a J
shape and have two
price peaks with a
rounded price
recession in
between.
Trading Tactics - WINs - Watch out
Ascending scallops for gaps pass your
often show a UCCs strike prices.
shaped volume
LEAPs spreaders
trend that gets
should go short one
heavier over time. month out to avoid
You can average
being called out or
down or leg into a having a run-a-way
position.
CC or LEAPs
spreads.
#3 Bullish!
Ascending scallops
appear when the
stock prices are
moving higher over
3, 6, or more
months.
#4 Bullish! This
formation had only a
6% failure rate which
is outstanding. When
the neckline slopes
downward at
indicated, the stock
performes better.
Pattern Shape A H&S bottom

with multiple
shoulders, mutiple
heads, or (rarely)
both. The head is
lower than the
shoulders but not
very much.
Trading Tactics WINs - Great
Usually higher
stock to generate
volume on the left
considerable
side of shoulders than premiums with up
than the
the down cycles
corresponding
before allowing
shoulders on the right the stock to
side. Great stock to appreciate in
value and cash
play up and down
with calls and puts or out.
shorting.
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Page 4 of 10
#5 Bullish! Great
CCing pattern for
stock price rise
when the horn
lengths are at least
twice as long than
most spikes over
the prior year.
Trading Tactics The left spike
shows higher than
average volume
and thus more
volatility. Some
horns appear near
the end of
uptrends, so watch
for the trend to
change!
Pattern Shape - Use

the weekly profile to
locate two downward
spikes in the horns
separated by a week
worth of time.
WINs - Horns will

usually not mark the
end of the
downtrends, but they
will be close. Prices
might continue to
drift down for $1 or
so then head upward.
Let the trend be your
friend!
#6 Bullish! H&S Pattern Shape - A

Bottoms are quite three-hump formation
easy to spot and with the center hump
they can be very below the other two.
profitable. H&S The three humps and
bottoms meets its two minor rises should
price targets 83% be well defined.
of the time.
Trading Tactics WINs - Volume is
- The line slanted usually highest on the
to the right is the left shoulder or head
neckline. The
and dimishes on the
price usually
right shoulder.
advances above Upwared breakouts
the neckline and occur usually with
stages an upside high volume. A low
breakout.
volume breakout is not
an indictor of an
impending failure.
#7 Bullish! A
Pattern Shape double bottom
Shaped like a big
occurs after a
upper case W that
downward price
usually takes
trend. High volume approxiately 4
commonly occurs months worth of
on the first bottom. time to complete the
formation pattern.
Trading Tactics - WINs - Bottoms
2/3s of the double humps that are closer
11/15/2004
Page 5 of 10
bottom throw back

to the breakout
price. Therefore,
consider waiting
for the throwback
and reversal for
prices to head
upward again.
together usually
show larger price
gains and breakouts.
It is suggested that
you average down or
leg into positions
with sideshows.
#8 Bullish! The
Pattern Shape failure rate for
Two drawn
falling wedges is
downward-sloping
very low at 10%
to the right side
while the average trendlines that
rise of 43% for this eventually must
indicator suggest a intersect. Use the
profitable formation trendline feature to
to trade. The highest draw the lines. Most
price after the
formations have at
breakout is approx. least five touches. 3
the beginning of the on one side and 2
trendlines.
on the other side.
Trading Tactics - WINs - Be ready
Most falling wedges to cover when the
has a mininum
falling wedges
duration of 3-wks or come to an
more. Anything less intersect. It may be
possible to buy
is most likely a
pennant. Formations PUTs as side shows
for the more
rarely exceed 4
aggressive
months long.
investors.
#9 Bullish! - This Pattern Shape tricky patern fails Stock prices

only 2% of the
oscillates between
time! The average two horizontal
rise is an
trendlines before
astounding 52%
breaking upward.
with a likely gain Looks like bridge
between 20% to
iron support
30% for late
structures.
comers.
Trading Tactics - WINs - Follow
The price will
the standard
bounce up and
approach of writting
down within a price CCs at the peaks
range. This pattern and allowing the
does take time to price to drop before
form and you can you cover cheap.
milk deep ITM CCs This will protect
or LEAPs spreads your downside and
11/15/2004
Page 6 of 10
depending on your free you up when

investing style.
the price begins to
move upward again.
#10 Bullish! The price Pattern Shape gaps upward after a During a flag
consolidation region phase, prices can
of several days to
slowly drift
several weeks long. downward as
This occurs after the much as -20%.
stock doubles in price. Prices move
sideways for 3 to
5 weeks.
Trading Tactics WINs - You
Buy after the breakout can buy and hold
is the safest course of or average down
action. Wait for prices your position. Let
to rise above the
the trend be your
highest high in the
friend.
flag.
#1 Bearish! This Pattern Shape patters fools many There are two
investors. Prices
patterns which are
usually go against related. Flags:price
the prevailing trend. action bounded by
In other words, the two parallel
price will
trendlines.
eventually fall as
Pennants:the two
the smart money
trendlines converge
exists.
to a point.
Trading Tactics - WINs - This kind
These formations of pattern last a total
usually form near of 3-weeks max.
the midpoint of a Volume usually
steep, quick price trends downward
trend. If you do not throughout the
have a strong
formation. "Volume
advance or decline precedes price!"
leading to the chart
pattern, ignore the
formation.
#2 Bearish! Prices Pattern Shape The price pattern

peak, curve
looks like a letter-J
downward and
around, then form a reversed. There is
lower peak. Look for no discernible
volume trend for
previous 52-week
descending
lows or previous
lower price support scallops. "Prices
11/15/2004
Page 7 of 10
levels for clues. This falls by it's own

is a good pattern to weight" is the term
go short with only a used to describe the
3% failure rate and downward price
an average decline of drift.
24%.
Trading Tactics - WINs - This is a
This is considered a good LEAPs puts
short-term pattern up pattern to leg into
to 3 months time or or writing deep
less.
ITM CCs if you
wish to remain
long. PUTs
sideshows are also
profitable.
#3 Bearish! One Pattern Shape of the most easy H&S tops have
patterns to spot and multiple heads,
shoulders, or both.
one of the most
profitable! Takes
as long as three
months to form.
Trading Tactics - WINs - When
Pull-backs average prices closes below
64% and
the neckline, a
formations with
breakout occurs. For
downword sloping those cases with a
necklines or higher steep, down-sloping
left shoulders
neckline, use the
perform better.
lowest trough price
as the breakout point.
#4 Bearish! Prices Pattern Shape usually trend up to Diamond pattern

the formation.
forms after a
Diamond tops need downward price
not form at the top trend. Trendlines
of a price chart!
surrounding the
minor hights & lows
resembles a
diamond.
Trading Tactics - WINs - Diamonds
Should you locate will sometimes form
a diamond pattern after a quick run up
and later discover in prices. The
that it may be a
reversal will usually
head & shoulders erase these gains and
top, don't worry! return prices to
Both formations
where they were
are very bearish! before the run-up.
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Page 8 of 10
#5 Bearish!
Descending
broadening
wedges act as a
consolidation of
the prevailing
trend. The volume
tends to increase
over time.
Trading Tactics This formation
acts as a
consolidation of
the trend. If prices
are moving down,
prices usually
continue down
after a downside
breakout.
Pattern Shape Price pattern looks

like a megaphone
titled downward.
Both trendlines slope
downward with the
lower trendline
having a steeper
slope.
WINs - If the
formation is
especially broad, buy
as the lower trendline
and sell at the top.
Alternatively, sell
short at the top
trendline once prices
are heading down and
close the position
after it rebounds off
the lower trendline.
#6 Bearish! Prices Pattern Shape trend for as long as Two parallel

3 months up to the trendlines for the
formation then
highs and the
oscillate with pull- lows.Looks like
backs that aver 55% bridge iron support
between two
structures.
horizontal
trendlines before
breaking out
downward.
Trading Tactics - WINs - Follow
The actualThe price the standard
will bounce up and approach of writting
down within a price CCs at the peaks
range. This pattern and allowing the
does take time to
price to drop before
form and you can you cover cheap.
milk deep ITM CCs This will protect
or LEAPs spreads your downside and
depending on your free you up when
investing style.
the price begins to
move upward again.
#7 Bearish! The
Pattern Shape price trend begins as Looks like a bulla negative downtrend horn and usually
that leads to a bounce takes less than
forming a
three months to
11/15/2004
Page 9 of 10
megaphone
appearance with
higher highs and
lower lows that
widends over time.
Then, the breakout is
upward usually off
the moving average
line.
Trading Tactics Partial rise at the end
of the formation
predicts a downside
breakout 67% of the
time and partial
declines predicts an
upside breakout 80%
of the time.
form. Volume
usually follows
price; rises as price
rises, falls when
prices fall.
WINs - Once
recognizing a
broadening
formation, go long
at the low and buy
after the stock
makes its turn at
the low. Likewise,
go short at the high
prices start heading
down at the top.
#8 Bearish! Prices
rise steadily along a
trendline, bump up,
round over, then
declines through the
trendline and
continues downward.
Pattern Shape - If
the trendline is flat
or nearly so, it is
not a good bumpand-rund reversal
candidate. The
typical trendline
was a 30-degree
angled line.
Trading Tactics WINs - When
Waiting for the
prices rises to the
breakout improves
old high, consider
investment
selling it if the the
performance. The
stock shows
close should be above weakness.
the down-sloping
trendline before you
buy the stock.
#9 Bearish! The
price trend begins as
a positive uptrend
that leads to a pullback forming a
megaphone
appearance with
higher highs and
lower lows that
widends over time.
Then, the breakout is
upward usually off
Pattern Shape Looks like a bullhorn and usually

takes less than
three months to
form. Volume
usually follows
price; rises as
price rises, falls
when prices fall.
11/15/2004
Page 10 of 10
the moving average

line.
Trading Tactics Partial rise at the end
of the formation
predicts a downside
breakout 65% of the
time and partial
declines predicts an
upside breakout 86%
of the time.
WINs - The
breakout can occur
in either direction
and, in several
cases, prices move
horizontally for
several months
before staging a
definitive
breakout.
#10 Bearish! Prices Pattern Shape trend downward then Prices trend
form lower highs
downward then
and higher lows
form lower highs
following two
and higher lows
sloping trendlines
following two
that eventually
sloping tredlines
intersect. The
that eventually
breakout is
intersect. Looks
downward with a
like a triangle on its
57% average
side.
pullback.
Trading Tactics - WINs - Unknows
Triangles with high ahead of time. You
volume breakouts
must wait for the
show larger losses. breakout before
Pullbacks are more investing.
likely to occur after
a high volume
breakout.
TECHNICAL TERMS DEFINED:
Percentage of formations that do not work as expected.
FAILURE RATE: The numbers apply to formations once they stage a
breakout (confirming the formation).
The letter R appears if the majority of formations act as
REVERSAL
reversals of the price trend and the letter C appears for
OR
consolidations. If both R and C appear in an entry, then the
CONSOLIDATION:
chart pattern has no overriding majority of either type.
A throwback is an upside breakout that returns price to the
THROWBACK, top of the formation or trendline boundary. A pullback is a
downside breakside breakout that returns prices to the
PULLBACK:
bottom of the formation or trendline boundary
Computed by measuring the individual percentage rise or
decline for each formation and tabulating a frequency
LIKELY RISE
distribution of the results. The most likely rise or decline is
OR
the range with the highest frequency and usually excludes
DECLINE
the rightmost column.
11/15/2004

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TOP TEN BULLISH AND BEARISH CHART PATTERNS