Читать книгу Encyclopedia of Chart Patterns - Thomas N. Bulkowski - Страница 81
Focus on Failures
ОглавлениеFigure 6.3 shows what a big M failure looks like. Price begins a long climb at A toward peak B. The drop to C and recovery to the second peak, D, is typical for a big M. Contrast dip C with the sloppy head‐and‐shoulders valley in Figure 6.2.
So far, the chart pattern looks perfect, a textbook example of a big M. Let's look at the volume trend (G). It slopes upward. Uh‐oh. But a rising volume trend in a big M doesn't have any impact on performance, so who cares?
At E, price breaks out downward when it closes below C, confirming the big M pattern as a valid chart pattern. However, the stock bottoms at E.
What happened?
A trader shorting the stock would become a body on the way to the morgue if they didn't close out their trade promptly. Price steamrolled higher by 131% on its way to being taken over by another company in January 2020.
Notice the breakout day volume. I drew a line from the breakout (E) to the volume bar directly beneath (H). Yes, volume is higher on the breakout day, but it is less than the 1‐month average (according to my computer, and it's never lied…so far). The statistics say that breakout volume for big Ms doesn't help or hurt performance. So that's another yawn, and it's not really a performance clue, either.
Price rises after E and busts the downward breakout when it closes above the top of the pattern, at F (a breakaway gap). This is another example where bearish selling pressure wasn't high enough to overcome bullish buying demand. The bulls didn't buy like crazy and push price higher. That's clear from the anemic volume surrounding the breakout, but the stock moved up anyway.
Figure 6.3 Price fails to drop more than 5% after the downward breakout.
The failure of this stock to stage a meaningful decline at E happens 14% of the time, and this is one example. A busted big M happens 38% of the time, so that's more alarming.
Let's talk more about numbers.