asubstantial gain. Over half the time, prices bottom in the first week aftera downward breakout and then climb substantially.Identification
Now that you know how upgrades behave, how do you recognize oneworth trading? Here’s a list of tips:• A broker upgrades the stock, adds it to its recommended list, priority list, or focus list.• On the announcement day, look for a large intraday (high-low)trading range that is above the 30-day average.• An upward breakout occurs when price closes above the intradayhigh or below the intraday low (downward breakout) posted onthe announcement day.• Upward breakouts typically show heavy volume but downwardbreakouts usually have average volume.
212
EVENT PATTERNS
Trading and Trading Tips
Once you have identified a possible trading candidate, here is how totrade it. Most of these tips assume that price continues rising for upwardbreakouts or continues tumbling for downward breakouts.• For upward breakouts, prices rise from one to three weeks, on average, before cresting.• For downward breakouts, prices drop for less than two weeks before starting to recover.• For swing traders looking for a fast trade, trade in the direction ofthe breakout but expect price to reverse quickly.• The average rise is 24% after an upward breakout. The averagedecline is 12% after a downward breakout in a bull market. Bothnumbers are based on perfect trades without fees.• Once price reaches the ultimate high (upward breakout), it tumbles an average of 30%. After reaching the ultimate low (downward breakout), prices climb an average of 44%.• It takes price an average of 61 days to reach the ultimate high and25 days to hit the ultimate low.• Eighteen percent of upgrades fail to rise more than 5%; 38% failto drop more than 5% after a downward breakout. Be especiallycareful trading downward breakouts.• The best upward breakouts occur within a third of the yearlyhigh. Downward breakouts do best near the yearly low. If youwant to short an upward breakout or go long a downward breakout, then do the opposite: Trade those with upward breakoutsnear the yearly low, downward breakouts near the yearly high.They move least before reversing.• Throwbacks occur 63% of the time. Pullbacks happen 37% ofthe time in a bull market.• Select tall patterns. Upward breakouts taller than the median5.61% of the height divided by the breakout price performbest. Downward breakouts taller than the median 5.32% alsodo well.
Stock Upgrades
213
Case Study
When I walked into the office before the market open, Jake was alreadythere, pounding on the keyboard. “Take a look at this trade and tell mewhat you think.”Figure 8.16 shows the trade that Jake made. The day of the upgradeannouncement, the stock made a large price swing but closed near theintraday low. It looked like a tail on the daily chart. Prices moved downward a few days later and the stock staged a downward breakout. Whenprice bounced off the low at B, Jake bought.“Was this a double bottom play?”He nodded.“Why didn’t you wait for confirmation of the double bottom?”“No need. The double bottom with a climbing price trend, coupledwith the upgrade, it was a no-brainer. But I used a stop in case I waswrong.”
Anadarko Petroleum Corp. (Petroleum (Producing), NYSE, APC)C
7370
D
38%Retrace
67646158
UpgradeSold
55524947454341
BoughtA
B
3937353331292700
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan 01
FIGURE 8.16 The stock formed a double bottom after an upgrade.
25
214
EVENT PATTERNS
The stock made a beeline run until the nervous Nellies in September grabbed control of the stock. Prices peaked at C and rounded over.The stock retraced 38% of the gain from B before bottoming and risingup to D.When price peaked at D, nearly the same as C, Jake suspected atrend change. “I sold once prices backed off the peak.”
9Chapter
Busted PatternsMaking Money byTrading Failure
ee that?” I asked Jake as I pointed at the squiggles on thescreen. “That’s a busted head-and-shoulders. Buy it. It’ll makeyou a bundle.”“Really?”“Have I ever lied to you before?”His eyebrow shot up for a moment then he turned to his computerand placed the trade. I smiled because I already owned the stock. I considered selling him my shares just as a famous mutual fund driver did afew years back. That guy hopped around the talk shows and played up astock. Then the following week, his mutual fund started dumping thething. When everyone found out about it, the story made quite a splash.Nevertheless, he’s still out there running his mutt fund.Traders have known about busted patterns for decades, but I consider them new. You never hear anything about trading a chart patternthat doesn’t work as expected. I classify a busted chart pattern as one inwhich price moves less then 10% after the breakout before changingtrend. This chapter takes a closer look at busted chart patterns.
“S
215
BUSTED PATTERNS
216
Busted Broadening PatternsFigure 9.1 shows the various busted broadening patterns. I’ll be discussing them in clockwise order, starting from the upper left. Few broadening patterns busted in the database I used, so don’t rely too heavily onthe performance numbers. They are likely to change with additionalsamples. For reference, upward breakouts from the chart pattern types Ilooked at averaged price gains of 36% in a bull market. Downwardbreakouts averaged a decline of 18%. You can compare those numbers(from unbusted patterns) with the busted-pattern performance that Ishow in the below tables. In all of the performance numbers I cite, theyare from many patterns traded perfectly, without commissions, so yourresults will vary.
BroadeningTop
BroadeningWedge,Ascending
Broadening Formation,Right-Angled and Ascending
Breakout
Breakout
BroadeningBottom
BroadeningWedge,Descending
Breakout
Broadening Formation,Right-Angled and Descending
Breakout
BreakoutBreakout
FIGURE 9.1 Shown are some of the variations of busted broadeningpatterns.
Busted Broadening Patterns
217
Broadening Top
Broadening tops with upward breakouts bust whenprice exits the top but doesn’t move far as the adjacentfigure shows. Price then curls downward and drops outthe bottom of the pattern, confirming the broadeningtop as a busted one.Broadening tops have a throwback rate of 54% and a pullback rateof 48% (see Table.9.1). Why should you care about that? If the breakoutis upward and prices throw back, you might think it’s a busted patternand try to trade it. That could squander several months worth of healthinsurance premiums, and everyone approaching retirement knows whatthat means. Wait for price to close below the lowest valley in the patternbefore shorting the stock or selling a long position. If price drops that far,chances are it will continue downward. If the breakout is downward andpulls back, wait for price to soar out the top of the pattern before takinga long position.TABLE 9.1Description
Upward Breakouts
Downward Breakouts
Throwback or pullback rate
54%
48%
Busted-pattern performance
–31% (38 samples)
56% (54 samples)
I looked at 183 broadening tops with upward breakouts in a bullmarket and found that just 38 busted (21%). Downward breakouts had182 qualifying and 54 busted (30%). Thus, busted broadening tops aresomewhat rare.Those that broke out downward then reversed climbed 56%. Thosethat broke out upward then plunged dropped an average of 31% as Table9.1 shows.
BUSTED PATTERNS
218
Broadening Wedge, Ascending
The adjacent figure shows a downwardbreakout from the ascending broadeningwedge in which price curls upward and willeventually close above the high in the chartpattern. When that happens, the patternbusts and it’s worth taking a long position.Ascending broadening wedges have a 50% throwback rate and a57% pullback rate (see Table 9.2). I found 29 patterns with throwbacksand 95 with pullbacks in a bull market. When a pattern busts, pricesclimb 43% or sink 36%, depending on the final trend direction.TABLE 9.2Description
Upward Breakouts
Downward Breakouts
Throwback or pullback rate
50%
57%
Busted-pattern performance
–36% (5 samples)
43% (38 samples)
Trading an ascending broadening wedge is difficult for upwardbreakouts because determining when the price has broken out is thetough part. When the pattern with an upward breakout busts, price tumbles, hitting the upsloping bottom trendline. When price closes belowthe bottom trendline, that confirms the busted pattern and makes for aclean sell short signal. The bad news is that this pattern has prices thatdon’t decline very far (slightly below average for all chart patterns withdownward breakouts).For downward breakouts like that shown in Figure 9.1, buy thestock when the price closes above the highest peak in the pattern. Watchfor prices to reverse if they approach the top trendline.Broadening Formation, Right-Angled and Ascending
Another downward breakout from a broadening pattern confirms the chart pattern as a busted one whenprice soars out the top. The same applies to upwardbreakouts when price peaks out the top, reverses, andthen tumbles below the horizontal bottom trendline.
Busted Broadening Patterns
219
The throwback and pullback rates appear in Table 9.3. Notice thatpullbacks occur 65% of the time, or two out of every three downwardbreakouts from a right-angled and ascending broadening formation. Ifprice pulls back and you decide to jump in and buy the stock, chancesare price will curl back down and drop. Wait for price to close above thehighest peak in the pattern before buying the stock. That way, there is agood chance that price will continue moving up. For upward breakouts,wait for price to close below the bottom trendline before selling a longposition or shorting the stock.TABLE 9.3Description
Upward Breakouts
Downward Breakouts
Throwback or pullback rate
47%
65%
Busted-pattern performance
–26% (16 samples)
–50% (63 samples)
Busted patterns have prices that climb 50% or drop 26% once thenew trend is established. The samples are few for downward breakouts,but they give you an indication of how well your trade might fare.Broadening Bottom
The adjacent figure shows a broadening bottom and it’ssimilar to a broadening top, except prices enter the pattern from the top, moving down. In this example, pricecloses below the lower trendline boundary but doesn’tmove very far before reversing. Price crosses the patternand pierces the upper trendline then continues higher.The pattern busts because the breakout is downward butfails to continue moving down. The same logic applies to upward breakouts that reverse and continue down, busting the pattern.TABLE 9.4Description
Upward Breakouts
Downward Breakouts
Throwback or pullback rate
41%
42%
Busted-pattern performance
–31% (20 samples)
49% (18 samples)
220
BUSTED PATTERNS
Table 9.4 shows the throwback and pullback rates, which are similar; both occur just over 40% of the time. Busted patterns, based on fewsamples despite a database of nearly 250 in the study, show that rises average 49% and declines average 31%. The rises occur after a downwardbreakout and a trend reversal (busting the pattern). Declines happen after an upward breakout reverses.As with many of the broadening patterns, take a position in thestock once price crosses the pattern and either closes beyond the priorpeak/valley (for aggressive traders), or closes outside the trendline boundary (safest). Price may reverse as it nears the trendline, so expect that.Broadening Wedge, Descending
The adjacent figure shows a busted descendingbroadening wedge. The breakout is upward butprice falters, rounds over, and plunges. Whenprice closes below the pattern’s low, it confirmsthe busted pattern. A similar situation applieswhen price breaks out downward and reverses,soaring out the top of the wedge, busting it.Descending broadening wedges are one of the better performers,but not as a busted pattern. How do I know? Because few patterns bust.I looked at 270 with upward breakouts and 47 with downward breakouts in a bull market, and just 51 patterns had price move less than 10%before reversing. Most reversals came from downward breakouts as Table9.5 shows.TABLE 9.5Description
Upward Breakouts
Downward Breakouts
Throwback or pullback rate
53%
53%
Busted-pattern performance
–26% (43 samples)
34% (8 samples)
Both upward and downward breakout directions have the same retrace rate: 53%. Those patterns that busted soared a weak 34% ordropped 26%, depending on the final trend direction. Because the sample size is so small, don’t rely on the performance numbers.
Busted Broadening Patterns
221
For upward breakouts, sell a long holding or short the stock onceprice drops below the lowest valley. Watch for price to reverse once itnears the lower trendline.For downward breakouts, buy when price closes above the toptrendline. It may stall at the high posted by the start of the pattern, so beprepared, and consider tightening your stops as the target nears.Figure 7.2 shows a busted descending wedge.Broadening Formation, Right-Angled and Descending
The last pattern of the six is the right-angled anddescending broadening formation. In this example, price breaks out downward and then movesup haltingly before soaring in a straight-line attack. When price closes above the top horizontaltrendline, it confirms a busted pattern. The breakout could have beenupward followed by a downward plunge, forcing a bust.After the breakout, prices return to the breakout price just over50% of the time in a throwback or pullback as Table 9.6 shows. After theretrace, if price happens to continue moving in the same direction, it willbust the pattern and drop 26% or rise 52% on average. Again, the sample size is small despite having 191 patterns in which to choose.TABLE 9.6Description
Upward Breakouts
Downward Breakouts
Throwback or pullback rate
52%
51%
Busted-pattern performance
–26% (28 samples)
52% (23 samples)
For upward breakouts, prices throw back and continue down, eventually dropping below the lowest valley and busting the chart pattern.Price need not pierce the lower trendline before you sell short the stock,but do make sure the industry and general market are also trendinglower. If they are not trending downward, then wait for price to close below the lower trendline before shorting the stock.With downward breakouts, wait for price to close above the toptrendline before buying. The example in Figure 9.1 shows this scenario.
BUSTED PATTERNS
222Case Study
“Are you going to use one of my trades, are yah?” Jake asked and put hisopen hand just inches from my face as I worked at the computer. He canbe annoying sometimes.“I’ve decided to use a trade in which you lost money.”His eyes lit up and he seemed buoyant, positively ecstatic. “The onewhere I lost ninety grand in JCB Enterprises?”I laughed. “I sometimes brag about my losses, too.” I punched abutton on the keyboard and the result appears in Figure 9.2.“When the stock broke out downward I took notice, but I wasn’t inthe mood to short the stock,” Jake said. “So I just watched it.”A few days later, the stock vaulted to the top end of the broadeningpattern. “That’s when I bought.” He placed a stop using a 38% Fibonacciretrace of the prior up move, which turned out to be near the bottom ofNoble Corporation (Oilfield Svcs/Equipment, NYSE, NE)37
Bought
353331
A
29
B
Sold
27252423
Breakout
222120191817161514
97
Nov
Dec
Jan 98
Feb
Mar
Apr
May
Jun
Jul
Aug
13
FIGURE 9.2 This busted broadening bottom broke out downward andzoomed higher, only to roll over and die.
Diamonds, Doubles, and Head-and-Shoulders
223
the gap (point A). Gaps are common support or resistance areas and youcan see how prices paused at B—even with the bottom of the gap.The stock moved up marginally until late April when it tumbledfour points in three days. “It looked like the start of a quick decline, andI wasn’t going to stick around to see what happened. So, I sold the stockbefore it could hit the stop and saved myself some money.” The stockcould have dropped to the breakout price at 25 in short order, so sellingwas the wise choice. If he held on, look how big a loss he would havetaken.
Diamonds, Doubles, and Head-and-ShouldersFigure 9.3 shows the next batch of busted patterns, selected alphabetically and arranged with the tops above.DiamondTop
DoubleTop1
Head-and-ShouldersTopHeadLSRS
2
BreakoutBreakoutBreakout
DiamondBottom
DoubleBottom
Head-and-ShouldersBottomBreakout
Breakout
1Breakout
2
LS
RSHead
FIGURE 9.3 Shown are busted diamonds, double tops and bottoms, andhead-and-shoulders.
224
BUSTED PATTERNS
Diamond Top
A diamond top busts when price breaks out in one direction and then returns to make an extended move inthe opposite direction. In the diamond top shown in theadjacent figure, the breakout is downward but busts thepattern when price closes above the highest peak.Throwbacks and pullbacks occur just short of 60%of the time (see Table 9.7). Wait for price to move above(after a downward breakout) the top of the diamond orbelow the bottom of the diamond (after an upward breakout) before taking a position. If you trade sooner, you may be buying into a throwback orpullback in which prices usually resume the original breakout direction.TABLE 9.7Description
Upward Breakouts
Downward Breakouts
Throwback or pullback rate
59%
57%
Busted-pattern performance
–23% (22 samples)
32% (28 samples)
The busted-pattern performance, based on few samples, is well below what it should be. The numbers are low enough that I would probably look for a different type of busted pattern to trade. (The inset inFigure 7.4 shows a busted diamond top with an upward breakout.)Double Top
Double tops bust when the breakout is downward,but price doesn’t fall far before rising above the top ofthe chart pattern. I used the Eve & Eve double top asthe proxy for all double tops. Because a double tophas only one breakout direction, I removed the upward breakout column. As Table 9.8 shows, pullbacks occur 59% of thetime. The 74% performance is the rise from busted double tops. This isdifferent from other patterns with up and down breakout directions.Those show a negative number for downward breakouts. A negative
Diamonds, Doubles, and Head-and-Shoulders
225
number for busted-pattern performance means that the breakout wasupward then prices tumbled. The 74% rise is a mouthwatering gain inany trader’s portfolio and the high sample count suggests the number issolid, but it’s based on perfect trades without any fees.TABLE 9.8Description
Downward Breakouts
Pullback rate
59%
Busted-pattern performance
74% (62 samples)
Trading a double top is simple. If the pattern confirms as a truedouble top, meaning that price has closed below the valley between thetwo tops, then wait for price to rise above the closest peak.Try drawing a trendline connecting the peaks. If the trendlineslopes downward, then buy when price closes above it. Ignore upslopingtrendlines; just use a close above the closest peak.If a double top does not confirm (the stock rises before closing below the valley floor), then you can also trade that pattern. The doubletop should qualify in all other respects (peak separation in both time andprice, distance from peak to valley, and so on). Buy the stock when pricerises above the nearest peak or above a downsloping trendline connectingthe two peaks.Head-and-Shoulders Top
A busted head-and-shoulders top looks like a pattern with an aggressive pullback except the pullback has price continuing up. It moves above thetop of the chart pattern, confirming the bust.A head and shoulders top breaks out downward and pulls back 50% of the time as Table 9.9shows. If price continues moving in the same direction (upward), the average rise is 53%. That is a nice return for a busted pattern and the highsample count means the number is reliable.
226
BUSTED PATTERNSTABLE 9.9
Description
Downward Breakouts
Pullback rate
50%
Busted-pattern performance
53% (68 samples)
There are two ways to trade a head-and-shoulders top. One is to select patterns that confirm (price closes below the neckline or right valleylow) and the other is to choose unconfirmed patterns. I show a confirmed head-and-shoulders top in Figure 9.3.Place a trade once price closes above the right shoulder peak for aggressive traders. Price may stall as it approaches the price level of the topof the head, so keep that in mind. You can also draw a downslopingtrendline connecting the head and right shoulder. Buy when price closesabove the trendline. For investors, wait for price to close above the valueof the head and then buy.Diamond Bottom
I found almost 300 diamond bottoms but few thatbusted. The adjacent figure shows an example. Pricebreaks out downward but quickly recovers and willeventually rise above the chart pattern’s high.As shown in Table 9.10, throwbacks occur 53%of the time but pullbacks happen 71% of the time. After the pattern busts, prices climbed an average of 34% or dropped an average of 25%.TABLE 9.10Description
Upward Breakouts
Downward Breakouts
Throwback or pullback rate
53%
71%
Busted-pattern performance
–25% (16 samples)
34% (15 samples)
Diamonds, Doubles, and Head-and-Shoulders
227
Trade diamond bottoms as you do the top variety. Wait for price toclimb above the highest peak in the pattern or below the lowest valley beforetaking a position. Entering earlier increases your risk of a failed trade.
Double Bottom
A busted double bottom reminds me of a rightangled and ascending broadening pattern, one witha flat base and upsloping top trendline. Price breaksout upward before tumbling and closing below thetwin bottoms, confirming a busted pattern.Double bottoms break out in one direction, so Table 9.11 onlyshows the results for upward breakouts. Throwbacks happen 55% of thetime so don’t be fooled into taking a position in the stock until it closesbelow the lowest valley in the pattern.TABLE 9.11Description
Upward Breakouts
Throwback rate
55%
Busted-pattern performance
–32% (58 samples)
Busted patterns have prices that drop an average of 32%, which Iconsider quite good. Like a double top, there are two ways to play abusted double bottom: You can buy an unconfirmed pattern or wait forconfirmation. Figure 9.3 shows the confirmed variety.The safest way to trade this pattern is to wait for price to close below the lowest valley in the double bottom. If you can draw an upslopingtrendline below the two valleys, then a close below this line would alsosignal a trade. If you do short early using the trendline approach, pricemay stall at the twin bottoms, forming a triple bottom, so be preparedfor that.
228
BUSTED PATTERNS
Head-and-Shoulders Bottom
A head-and-shoulders bottom busts when thebreakout is upward and prices tumble. That’s thesituation Figure 9.3 shows.The throwback rate from a head-andshoulders bottom (HSB) is 45% (see Table 9.12).Busted patterns have prices that decline 28% on average.Trading an HSB is similar to other busted patterns. After the breakout, price will curl downward. When it closes below the right shoulderlow, sell a long position or short a new one. Less aggressive traders willwant to wait for price to decline below the head before trading. Otherwise, expect price to pause or reverse either at the price level of the leftshoulder valley or the head. Another early entry is to use a trendline connecting the head and right shoulder valley. When price closes below thistrendline, short the stock or sell a long position. Again, watch for the decline to stall when it drops to the price level of the head.TABLE 9.12Description
Upward Breakouts
Throwback rate
45%
Busted-pattern performance
–28% (53 samples)
With an HSB, you need not wait for the pattern to confirm (priceto close above the neckline) before trading it. If the three valleys conformto an HSB but prices drop after forming the right shoulder instead ofconfirming the HSB, then trade the stock according to the precedingguidelines.Case Study
Sometimes you don’t see a chart pattern soon enough to trade it. My experience suggests you should pass up a trade if you can’t get in at a goodprice or if the price is running away from you. When I grab a quote on astock, if the stock is down, I won’t buy it. Why not? Because price isfalling. In a few minutes, it will be cheaper.
Diamonds, Doubles, and Head-and-Shoulders
229
I won’t buy a stock if it is up too much intraday. Why not? BecauseI know that as soon as I buy, price will turn down, and I’ll be stopped outfor a loss. The comfort zone lies somewhere in between those two ranges.Like Goldilocks and the Three Bears, the stock has to be moving up butnot too quickly.Figure 9.4 is a case in point. When Jake found this head-and-shoulderstop, the stock confirmed the pattern but prices climbed, rising above thehead and producing a busted pattern.“What should I do?” he asked.“Wait for a throwback and then buy.” I could tell that he reallywanted to buy the stock right now. He started wringing his hands, pacing about the room, trying to decide. “Don’t fall in love with the stock,Jake. There will be other stocks.”He looked up and me and knew that I was right. He returned to hiscomputer and buried his head in the glow of the computer screen.
Holly Corporation (Petroleum (Integrated), NYSE, HOC)33
DiscoveredLS
31302928
HeadRS
27262524232221201918171615May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan 05
Feb
FIGURE 9.4 Jake missed this trade because he discovered it too lateto take a position.
14
BUSTED PATTERNS
230
In the weeks since I took a snapshot of Figure 9.4, the pattern hasn’tthrown back so he missed the trade. The stock has moved up to 45 andchange. Did he miss a promising opportunity? You bet. Many stocksdon’t form straight-line runs like this one, so I think it pays to be cautious and pass up a late-entry trade.If he had spotted the pattern sooner, he should have put a buy stopat the head 28.78 (a penny above the peak) or drawn a downslopingtrendline along the head and right shoulder peaks. A close above thetrendline at 27.28 would have gotten him in sooner, but was more risky.Pullbacks often rise to meet or slightly exceed the height of the rightshoulder peak. If he had bought in at 27.28, he could have pulled $15 to$17 per share out of the market.“Timing is everything,” I told him.He looked at his watch. “11 o’clock.”
More Busted PatternsFigure 9.5 shows the last spread of busted patterns.
Rectangle
AscendingTriangle
DescendingTriangle
Breakout
Breakout
Breakout
SymmetricalTriangle
FallingWedge
RisingWedge
Breakout
Breakout
Breakout
FIGURE 9.5 Here are another six busted chart patterns.
More Busted Patterns
231
Rectangles
Rectangles can break out in any direction, but whenprice reverses and crosses the pattern to exit the opposite side, it confirms a busted pattern. That’s the time totrade it. Figure 9.5 shows an example of this scenario.I used a rectangle top as the proxy for all rectangles because it hadthe most samples (676), and Table 9.13 shows the numbers. Rectanglesthrow back 64% of the time and pull back 58% of the time. If price continues moving in the new direction, the rectangle busts and price rises anaverage of 52% or drops an average of 25%. Downward breakouts havefew samples.TABLE 9.13Description
Upward Breakouts
Downward Breakouts
Throwback or pullback rate
64%
58%
Busted-pattern performance
–25% (57 samples)
52% (22 samples)
The above figure shows a downward breakout from a rectangle top.Prices pull back and shoot out the top of the pattern. Only when theycross to the other side and close outside the trendline boundary should atrader consider the pattern busted and jump on the new trend.After a downward breakout like that shown, if prices return to therectangle pattern, then look for a partial decline. If one occurs inside therectangle then that would be a buy signal with an assumed upwardbreakout.Ascending Triangle
Ascending triangles can break out in either direction.The adjacent figure shows an upward breakout withprices throwing back and plunging through the bottomtrendline, confirming a busted pattern.Upward breakouts throw back 57% of the time asshown in Table 9.14, and if prices keep tumbling, they bust the patternand decline an average of 24%. Downward breakouts pull back 49% of
232
BUSTED PATTERNS
the time, and busted patterns have prices rising 45%. Again, these numbers may be averages, but they are from perfect trades without feessubtracted.TABLE 9.14Description
Upward Breakouts
Downward Breakouts
Throwback or pullback rate
57%
49%
Busted-pattern performance
–24% (149 samples)
45% (46 samples)
Figure 9.5 shows an ascending triangle with a busted upward breakout. For aggressive traders, short