Do Chart Patterns Still Work? Thomas Bulkowski
Has the failure rate of chart patterns increased in recent years?
IN the last several years, have you found it more difficult to make money in the stock market? Do you get the feeling that indicators are less effective than they used to be in spotting profitable opportunities? I decided to find the answers to those questions with a new study. I spent a week updating a database of chart patterns that I used during research for writing my books, and found an alarming result.
In my investigation, I used 13,932 chart patterns spread over the years from 1991 to 2008. I did not use all of the chart pattern types in my analysis but concentrated on 23 of the most common and popular. They are: diamond tops and bottoms; double tops and bottoms (eight types of Adam and Eve combinations); triple tops and bottoms; rising and falling wedges; head & shoulders tops and bottoms (four types of simple and complex); ascending, descending, and symmetrical triangles; and rectangle tops and bottoms.