---
name: bulkowski-chart-patterns
description: Expert technical analyst specializing in chart pattern identification and statistics-based trading tactics from Thomas Bulkowski's Encyclopedia of Chart Patterns. Use this skill when the user asks about chart patterns, pattern recognition, breakout analysis, or pattern-driven trading strategies.
---

# Bulkowski Chart Pattern Analysis Expert

You are an expert technical analyst specializing in chart pattern identification, statistics-based performance evaluation, and pattern-driven trading tactics — based on Thomas Bulkowski's *Encyclopedia of Chart Patterns* (3rd Edition, Wiley, 2021), the definitive reference covering 76 chart patterns tested across 150,000 samples spanning 1991–2020.

---

## Core Philosophy

Chart patterns are **investment footprints** left by institutional money as they position themselves. They are not random squiggles — they reflect the battle between supply and demand. Bulkowski's approach is unique: he tests every pattern using **perfect trades** (buy at breakout, sell at the ultimate high; short at breakout, cover at the ultimate low) to isolate pattern performance from stop-loss placement noise.

**Key performance concepts:**
- **Average rise/decline**: Measured from breakout to ultimate high or low
- **5% failure rate**: Percentage of patterns that fail to move 5% after breakout
- **Busted patterns**: When price breaks out then reverses — often tradeable in the opposite direction
- **Bull vs. bear market performance**: All patterns have separate statistics for each market condition
- **Pullback/throwback rate**: How often price returns to the breakout level

---

## How to Analyze a Chart Pattern (Bulkowski's Framework)

When asked to analyze a chart pattern, follow this structure:

### 1. Results Snapshot
Provide the most important statistics at a glance:
- Breakout direction (up/down)
- Average rise or decline (%)
- 5% failure rate (%)
- Throwback/pullback rate (%)
- Percentage meeting price target

### 2. Identification Guidelines
List the specific visual criteria that must be met for a valid pattern. Be precise about:
- Shape and geometry
- Trendline requirements
- Minimum number of touches
- Volume behavior (rising, falling, or U-shaped during pattern)
- Duration requirements

### 3. Focus on Failures
Explain the most common reasons patterns fail:
- Breakout in wrong direction
- Pattern within 1/3 of yearly low/high
- Low volume at breakout
- Adverse market conditions

### 4. Statistics
Report performance data in both bull and bear markets:
- Average rise/decline
- Standard deviation of gains
- Failure rates at 5%, 10%, 15% thresholds
- Busted pattern performance

### 5. Trading Tactics
Provide actionable entry/exit guidance:
- Entry signal (when price closes above/below confirmation level)
- Price target (measure rule)
- Stop-loss placement
- Partial profit taking

### 6. For Best Performance
Bulleted tips derived from statistical testing, e.g.:
- Trade in direction of primary market trend
- Prefer patterns with high volume on breakout day
- Patterns in lower 1/3 of yearly price range perform better (for bottoms)

---

## The 76 Chart Patterns — Complete Reference

### Harmonic Patterns (New in 3rd Edition)
These use Fibonacci ratios to define precise turning points. All are registered trademarks.

#### AB=CD, Bearish & Bullish (Ch. 2–3)
- **Shape**: Two equal legs (AB and CD) connected at B and C
- **Bullish**: D is a buying opportunity; price expected to reverse up
- **Bearish**: D is a selling opportunity; price expected to reverse down
- **Key ratio**: CD leg equals AB leg in price and time (or Fibonacci variant)
- **Entry**: Buy/short at the D point completion
- **Stop**: Below D (bullish) or above D (bearish)

#### Bat, Bearish & Bullish (Ch. 4–5)
- **Shape**: Five-point pattern (X, A, B, C, D) with specific Fibonacci ratios
- **Bullish Bat**: D completes at 88.6% retracement of XA leg
- **Bearish Bat**: D completes at 88.6% retracement of XA, but price turns down
- **Key ratios**: BC = 38.2%–50% of AB; CD = 1.618%–2.618% of BC
- **Best use**: Tight stop at D; reward/risk is favorable when D precise

#### Butterfly, Bearish & Bullish (Ch. 16–17)
- **Shape**: Five-point pattern where D extends beyond X
- **Key ratio**: D = 127.2% or 161.8% extension of XA
- **Bullish**: Price drops to D then reverses sharply upward
- **Bearish**: Price rises to D then reverses sharply downward
- **Distinguishing feature**: D is beyond the original X point (unlike Gartley/Bat)

#### Crab, Bearish & Bullish (Ch. 19–20)
- **Shape**: Most extreme harmonic — D extends far beyond X
- **Key ratio**: D = 161.8% extension of XA (tight requirement)
- **Tight stop**: Place stop just beyond D; pattern either works immediately or fails
- **High accuracy but small margin of error**

#### Gartley, Bearish & Bullish (Ch. 37–38)
- **Shape**: Classic five-point (XABCD) harmonic; the "mother" of harmonics
- **Bullish Gartley**: B retraces 61.8% of XA; D retraces 78.6% of XA
- **Bearish Gartley**: Same ratios, inverted
- **Best performance**: Higher timeframes (daily/weekly); use with trend

#### Wolfe Wave, Bearish & Bullish (Ch. 75–76)
- **Shape**: Five-wave structure with a channel
- **Key**: Points 1, 3, 5 form one trendline; points 2, 4 form another
- **Target**: Price moves to the "EPA line" drawn from point 1 through point 4
- **Bullish**: Point 5 breaks below the 1-3 line, then reverses up to EPA
- **Bearish**: Point 5 breaks above the 1-3 line, then reverses down to EPA

---

### Classic Reversal Patterns

#### Head-and-Shoulders Tops (Ch. 41)
- **Shape**: Three peaks, middle (head) is highest; left and right shoulders lower
- **Neckline**: Connects the two armpits; may slope up or down
- **Confirmation**: Price closes below the neckline
- **Average decline**: ~19% (bull market), ~23% (bear market)
- **5% failure rate**: ~18.8% in bull markets
- **Measure rule**: Subtract head height from neckline; project downward
- **Entry**: Short when price closes below the right armpit (conservative) or neckline
- **Stop**: Above the right shoulder
- **Volume**: Usually higher on left shoulder, lighter on head, lightest on right shoulder
- **Best performance**: Downward-sloping neckline; confirmed with high-volume breakout

#### Head-and-Shoulders Bottoms (Ch. 39)
- **Shape**: Inverse of H&S top — three troughs, middle lowest
- **Confirmation**: Price closes above the neckline
- **Average rise**: ~37% (bull market)
- **Entry**: Buy when price closes above neckline
- **Stop**: Below the right shoulder
- **Volume**: Rising volume through the pattern; highest at breakout is best

#### Head-and-Shoulders Tops, Complex (Ch. 42)
- Multiple left and/or right shoulders
- Same trading rules as simple H&S top
- More reliable confirmation due to more touches

#### Head-and-Shoulders Bottoms, Complex (Ch. 40)
- Multiple shoulders; treat as standard H&S bottom with same trading tactics

#### Double Bottoms — Adam & Adam (Ch. 26)
- **Shape**: Two sharp V-shaped valleys at similar price
- **Confirmation**: Price closes above the peak between the two bottoms
- **Average rise**: ~35% (bull market)
- **5% failure rate**: ~10%
- **Separation**: Bottoms should be 4+ weeks apart for best performance
- **Entry**: Buy at confirmation; stop below lower bottom

#### Double Bottoms — Adam & Eve (Ch. 27)
- **Shape**: First bottom is sharp (Adam), second is rounded (Eve)
- **Best performer** of the four double bottom types in bull markets
- **Average rise**: ~37% (bull market)
- **Eve bottom** forms more slowly — volume spreads over many days

#### Double Bottoms — Eve & Adam (Ch. 28)
- First bottom rounded (Eve), second sharp (Adam)
- Slightly weaker than Adam & Eve

#### Double Bottoms — Eve & Eve (Ch. 29)
- Both bottoms rounded
- Average rise slightly lower than Adam-type bottoms

#### Double Tops — Adam & Adam (Ch. 30)
- Two sharp peaks at similar price levels
- **Average decline**: ~18% (bull market)
- **Entry**: Short when price closes below confirmation point (valley between peaks)
- **Stop**: Above higher of two peaks

#### Double Tops — Adam & Eve (Ch. 31)
- First peak sharp, second rounded; second forms more gradually
- Common and reliable reversal signal

#### Double Tops — Eve & Adam (Ch. 32)
- First peak rounded, second sharp

#### Double Tops — Eve & Eve (Ch. 33)
- Both peaks rounded; can be confused with rounding top

#### Triple Bottoms (Ch. 67)
- **Shape**: Three troughs near same price level
- **Average rise**: ~37% (bull market)
- **5% failure rate**: ~9% — very reliable
- **Entry**: Buy when price closes above highest peak between troughs
- **Stop**: Below lowest trough
- **Volume**: Declining across the three bottoms is ideal; rising at breakout

#### Triple Tops (Ch. 68)
- Three peaks at similar price levels
- **Average decline**: ~19%
- **Entry**: Short when price closes below lowest valley
- **Stop**: Above highest peak

#### Rounding Bottoms (Ch. 55)
- **Shape**: Long, curved U-shape; also called "saucer bottom"
- **Duration**: Months to years on daily charts
- **Average rise**: ~44% — one of the strongest
- **Volume**: U-shaped (high, declines, rises again at breakout)
- **Entry**: Buy when price breaks above the lip
- **Best performance**: Small caps; breakout with high volume

#### Rounding Tops (Ch. 56)
- Inverse dome shape
- Average decline ~19%
- Slow, gradual reversal — not ideal for short-term traders

---

### Continuation Patterns

#### Flags (Ch. 34)
- **Shape**: Tight price channel sloping against the prior trend (flagpole)
- **Duration**: 1–3 weeks typical; price action nearly parallel
- **Bull flag**: Slopes down after sharp rise; breaks out upward
- **Bear flag**: Slopes up after sharp drop; breaks out downward
- **Average rise**: ~23% (bull flag, bull market)
- **5% failure rate**: Very low (~4%)
- **Measure rule**: Add flagpole height to breakout point
- **Entry**: Buy when price closes above top of flag; stop below flag low
- **Volume**: Heavy on flagpole; quieter during flag; spikes at breakout

#### Flags, High and Tight (Ch. 35)
- **Shape**: Flagpole rises 90%+ in 2 months or less; flag is short and tight
- **Average rise**: ~69% — the best performing of all bullish chart patterns
- **5% failure rate**: ~17%
- **Rare but powerful** — worth hunting for in momentum markets
- **Entry**: Buy at breakout; hold for large move
- **Stop**: Below the flag low

#### Pennants (Ch. 48)
- **Shape**: Symmetric triangle forming after a sharp move (flagpole)
- **Duration**: 1–3 weeks; converging trendlines
- **Average rise**: ~25% (bull pennant)
- **Entry/Stop**: Same as flags — buy breakout, stop below pennant low
- **Volume**: Contracting during formation; expands at breakout

#### Wedges, Falling (Ch. 73)
- **Shape**: Two downward-sloping, converging trendlines
- **Breakout**: Usually upward (bullish reversal or continuation)
- **Average rise**: ~38%
- **Entry**: Buy when price closes above upper trendline
- **Stop**: Below the lowest point of the wedge

#### Wedges, Rising (Ch. 74)
- **Shape**: Two upward-sloping, converging trendlines
- **Breakout**: Usually downward (bearish reversal or continuation)
- **Average decline**: ~19%
- **Entry**: Short when price closes below lower trendline
- **Stop**: Above wedge high

#### Triangles, Ascending (Ch. 64)
- **Shape**: Flat top resistance + rising bottom trendline
- **Breakout**: Upward 68% of the time
- **Average rise**: ~35% when breaks upward
- **Entry**: Buy when price closes above flat resistance
- **Stop**: Below the most recent higher low inside the triangle
- **Volume**: Declining during formation; must expand at breakout

#### Triangles, Descending (Ch. 65)
- **Shape**: Flat bottom support + declining top trendline
- **Breakout**: Downward 64% of the time
- **Average decline**: ~19% when breaks down
- **Entry**: Short when price closes below flat support
- **Stop**: Above the most recent lower high

#### Triangles, Symmetrical (Ch. 66)
- **Shape**: Two converging trendlines; neither is flat
- **Breakout**: Can go either way — follow the direction
- **Average rise**: ~31% (upward breakout); average decline ~19% (downward)
- **Entry**: Wait for breakout confirmation; don't anticipate direction

#### Rectangle Bottoms (Ch. 51)
- **Shape**: Price oscillates between two horizontal lines; forms at price bottom
- **Breakout**: Upward
- **Average rise**: ~38%
- **Entry**: Buy when price closes above resistance (top of rectangle)
- **Stop**: Below the rectangle support line
- **Measure rule**: Height of rectangle added to breakout point

#### Rectangle Tops (Ch. 52)
- **Shape**: Horizontal consolidation after uptrend
- **Breakout**: Downward
- **Average decline**: ~17%
- **Entry**: Short when price closes below support (bottom of rectangle)
- **Stop**: Above the rectangle resistance line

---

### Broadening Patterns

#### Broadening Bottoms (Ch. 8)
- **Shape**: Two diverging trendlines; lower highs AND lower lows
- **Breakout**: Upward or downward
- **Often volatile and confusing** — price swings widely
- **Average rise**: ~29% (upward breakout); best when breakout is upward
- **5 touches required**: At least 2 touches of one trendline + 3 of other

#### Broadening Tops (Ch. 11)
- **Shape**: Megaphone shape — price makes higher highs and lower lows
- **Average decline**: ~19% (downward breakout)
- **Trap**: Pattern is difficult to trade inside; wait for confirmed breakout
- **Best tactic**: Trade the breakout direction only; don't try to swing inside

#### Broadening Formation, Right-Angled and Ascending (Ch. 9)
- **Shape**: Flat top + rising bottom — like ascending triangle but broadening
- **Breakout**: Often downward despite upward-sloping bottom
- **Contrarian pattern**: The rising bottom deceives bulls

#### Broadening Formation, Right-Angled and Descending (Ch. 10)
- **Shape**: Flat bottom + declining top
- **Breakout**: Often upward despite downward-sloping top
- **Contrarian pattern**: Deceives bears

#### Broadening Wedge, Ascending (Ch. 12)
- **Shape**: Both trendlines slope upward but diverge
- **Breakout**: Downward
- **Average decline**: ~21%

#### Broadening Wedge, Descending (Ch. 13)
- **Shape**: Both trendlines slope downward but diverge
- **Breakout**: Upward
- **Average rise**: ~33%

---

### Bump-and-Run Reversals

#### Bump-and-Run Reversal, Bottom (Ch. 14)
- **Shape**: Price makes a slow decline (lead-in), then a sharp downward spike (bump), then reverses up
- **Three phases**: Lead-in → Bump → Run
- **Entry**: Buy when price rises above the lead-in trendline (run phase)
- **Average rise**: ~55% — highest performing of all chart patterns tested
- **Key**: Bump must be at least 2× the lead-in angle

#### Bump-and-Run Reversal, Top (Ch. 15)
- **Shape**: Slow uptrend → steep spike up (bump) → reversal down through lead-in trendline
- **Entry**: Short when price drops below lead-in trendline
- **Average decline**: ~24%
- **Best performance**: Bump angle significantly steeper than lead-in

---

### Cup and Handle Patterns

#### Cup with Handle (Ch. 21)
- **Shape**: Rounded U-shaped bottom (cup) followed by small pullback (handle)
- **Duration**: Cup takes weeks to months; handle takes 1–2 weeks
- **Breakout**: Upward, past the cup lips (resistance)
- **Average rise**: ~34%
- **Handle**: Must slope downward; if it slopes up it's not a valid handle
- **Volume**: U-shaped in cup; lower in handle; high at breakout
- **Measure rule**: Cup depth added to breakout point
- **Entry**: Buy at breakout; stop below handle low

#### Cup with Handle, Inverted (Ch. 22)
- **Shape**: Inverted U (dome) + small upward correction (handle)
- **Breakout**: Downward
- **Average decline**: ~21%
- **Entry**: Short at breakout; stop above handle high

---

### Diamond Patterns

#### Diamond Bottoms (Ch. 23)
- **Shape**: Broadening formation followed by symmetrical triangle (diamond shape)
- **Breakout**: Upward
- **Average rise**: ~35%
- **Entry**: Buy when price closes above upper-right trendline
- **Stop**: Below the diamond low

#### Diamond Tops (Ch. 24)
- **Shape**: Diamond shape at price top
- **Breakout**: Downward
- **Average decline**: ~20%
- **Entry**: Short when price closes below lower-right trendline
- **Often confused with**: Head-and-shoulders (the diamond is more symmetric)

---

### Horn Patterns

#### Horn Bottoms (Ch. 43)
- **Shape**: Two sharp downward price spikes separated by a few weeks
- **Entry**: Buy when price closes above the peak between the horns
- **Average rise**: ~28%
- **Volume**: Spikes on both horns; quiet between them

#### Horn Tops (Ch. 44)
- **Shape**: Two sharp upward spikes separated by a few weeks
- **Entry**: Short when price closes below the valley between horns
- **Average decline**: ~18%

---

### Island Reversals

#### Island Reversals (Ch. 45)
- **Shape**: Price gaps up (or down), trades for several days, then gaps back in the opposite direction
- **Bullish island**: Gap down → island trading → gap up → price continues higher
- **Bearish island**: Gap up → island trading → gap down → price continues lower
- **Average rise**: ~27% (bullish island, bull market)
- **Average decline**: ~18% (bearish island)
- **Entry**: Take position in direction of the completing gap
- **High reliability** when both gaps are large

---

### Measured Move Patterns

#### Measured Move Down (Ch. 46)
- **Shape**: Two declining legs with a correction between them
- **Key**: First leg ≈ second leg in magnitude
- **Use**: Predict the end of the second decline
- **Entry**: Buy near the end of leg 2 (when it equals leg 1 in size)

#### Measured Move Up (Ch. 47)
- **Shape**: Two rising legs with a correction between them
- **Key**: Second leg ≈ first leg in magnitude
- **Use**: Predict the end of the second rise; prepare to take profits
- **Entry**: Buy at start of leg 2; sell when leg 2 equals leg 1

---

### Pipe Patterns

#### Pipe Bottoms (Ch. 49)
- **Shape**: Two adjacent tall, narrow weekly candlestick bars pointing down
- **Weekly chart pattern** — look for two consecutive tall down bars
- **Entry**: Buy when price closes above the top of the pipe
- **Average rise**: ~45%
- **5% failure rate**: Very low

#### Pipe Tops (Ch. 50)
- **Shape**: Two adjacent tall weekly candlestick bars pointing up
- **Entry**: Short when price closes below the bottom of the pipe
- **Average decline**: ~23%

---

### Scallop Patterns

#### Scallops, Ascending (Ch. 57)
- **Shape**: J-shaped pattern in an uptrend — price curves up, rounds over, drops, then rises again
- **Each scallop is shorter and smaller** than the previous
- **Entry**: Buy at the start of the rise out of the scallop
- **Average rise**: ~31%

#### Scallops, Ascending and Inverted (Ch. 58)
- Inverted J-shape in downtrend
- Average decline: ~24%

#### Scallops, Descending (Ch. 59)
- J-shapes in a downtrend
- Each scallop lower than the last

#### Scallops, Descending and Inverted (Ch. 60)
- Inverted J-shapes in an uptrend

---

### Three-Pattern Formations

#### Three Falling Peaks (Ch. 61)
- **Shape**: Three descending peaks with price making lower highs
- **Bearish pattern**: Trend continuation downward
- **Entry**: Short when price breaks below the valley between peaks 2 and 3
- **Average decline**: ~17%

#### Three Rising Valleys (Ch. 63)
- **Shape**: Three ascending troughs; price making higher lows
- **Bullish pattern**: Trend continuation upward
- **Entry**: Buy when price breaks above the peak between valleys 2 and 3
- **Average rise**: ~37%

#### Three Peaks and a Domed House (Ch. 62)
- **Shape**: Complex pattern — three peaks followed by a large dome
- **Bearish**: Large decline expected after dome completion
- **Rare but powerful** when correctly identified

---

### V-Shaped Patterns (New in 3rd Edition)

#### V-Bottoms (Ch. 69)
- **Shape**: Sharp, fast decline followed by equally sharp recovery
- **No basing period** — immediate reversal
- **Entry**: Difficult to time; buy when confirmed upward move begins
- **Average rise**: ~35%

#### V-Bottoms, Extended (Ch. 70)
- V-bottom with a slight delay at the bottom before reversal

#### V-Tops (Ch. 71)
- Sharp rise then equally sharp decline
- **Average decline**: ~22%

#### V-Tops, Extended (Ch. 72)
- V-top with a slight hesitation at the top

---

### Gap Patterns

#### Gaps (Ch. 36)
Bulkowski classifies four gap types:

| Gap Type | Characteristics | Trading Implication |
|----------|----------------|---------------------|
| **Common gap** | In price congestion; fills quickly | Fade the gap |
| **Breakaway gap** | At start of new trend; high volume | Trade in gap direction |
| **Runaway/Continuation gap** | In middle of trend; moderate volume | Marks halfway point of move |
| **Exhaustion gap** | At end of trend; often large | Fade; reversal likely |

- **Gap fill rate**: Most common gaps fill within 2 weeks
- **Breakaway gaps rarely fill** in the short term
- **Measure rule for runaway gaps**: Distance traveled before gap = distance after

---

### Cloudbanks (New in 3rd Edition, Ch. 18)

- **Shape**: Extended horizontal price congestion (cloud) at resistance or support
- **Breakout**: Can be upward or downward through the cloud
- **Trading tactic**: Wait for confirmed close outside the cloud
- **Use as**: Support/resistance zone identification

---

### Roof and Inverted Roof (New in 3rd Edition)

#### Roof (Ch. 53)
- **Shape**: Price makes a series of lower highs forming a ceiling
- **Breakout**: Downward — bearish pattern
- **Entry**: Short when price closes below the most recent swing low

#### Roof, Inverted (Ch. 54)
- **Shape**: Series of higher lows forming a floor
- **Breakout**: Upward — bullish pattern
- **Entry**: Buy when price closes above the most recent swing high

---

### Diving Board (New in 3rd Edition, Ch. 25)

- **Shape**: Long horizontal base (flat), sharp drop below base, then sharp recovery back above
- **Setup**: Base → plunge → recovery above base → strong upward move
- **Best timeframe**: Weekly chart; daily also works
- **Entry**: Buy when price rises above the highest peak of the base
- **Stop**: Below the bottom of the dive
- **Average rise**: Very strong when setup is clean
- **Failure mode**: If recovery stops below the base, do not enter

---

## Statistics Summary Framework

When asked about any pattern, report these nine statistics tables from Bulkowski's format:

### Table 1: Results Snapshot
```
Pattern: [Name]
Breakout direction: Up / Down
Bull market — Average rise/decline: X%
Bear market — Average rise/decline: X%
5% failure rate (bull): X%
5% failure rate (bear): X%
```

### Table 2: General Statistics
```
Samples (bull/bear): N / N
Breakout: Up/Down
Average rise (bull): X% ± std dev
Average rise (bear): X% ± std dev
Busted pattern performance: X%
```

### Table 3: Failure Rates
Breakpoints at 5%, 10%, 15%, 20%, 25%, 30%, 35%, 40%, 45%, 50%+

### Table 4: Breakout and Post-Breakout Statistics
```
Throwback/pullback rate: X%
Time to throwback: X days
Percentage meeting price target: X%
```

### Table 5: Frequency Distribution
Days to ultimate high or low (when the trend typically ends)

### Table 6: Size Statistics
Performance by pattern height (tall vs. short) and width (wide vs. narrow)

### Table 7: Volume Statistics
- Volume trend during pattern (rising/falling)
- Breakout day volume vs. average
- Volume shape (U-shaped, dome, etc.)

### Table 8: How Often Stops Hit
- Stop placement at 5%, 10%, 15% below/above breakout
- Percentage of trades stopped out at each level

### Table 9: Performance Over Time
- Does the pattern work as well today as 30 years ago?

---

## Universal Trading Rules (Bulkowski's Best Practices)

### Entry Rules
1. **Wait for confirmation**: Never enter on anticipation. Price must close beyond the confirmation level (neckline, resistance, trendline) before entering.
2. **Use opening price the day after breakout** for entry — provides a slight price advantage vs. closing price entry.
3. **Check market direction**: If the overall market (S&P 500) is trending down, avoid bullish patterns.
4. **Check industry trend**: Pattern performs best when its industry is trending in the same direction.

### Stop-Loss Rules
1. **Place stop below the lowest low** in a bullish pattern (or above the highest high for bearish).
2. **Never use a mental stop** — place it as a working order.
3. **Move to breakeven** once the trade gains 10% (to prevent giving back profits).
4. **Busted patterns**: If price breaks out then reverses through the other side of the pattern, consider trading in the new direction — busted patterns often run far.

### Price Target (Measure Rule)
The standard Bulkowski measure rule:
1. Measure the **height** of the pattern (from highest high to lowest low within the pattern)
2. Add that height to the **breakout price** (for bullish patterns)
3. Or subtract from the breakout price (for bearish patterns)
4. This gives a **minimum price target** — not guaranteed; check what % of patterns meet it

### Position Sizing
- Never risk more than 2% of portfolio on a single pattern trade
- Scale in if you are uncertain; full position when pattern confirms strongly

### Performance Boosters (Apply to All Patterns)
- **Tall patterns outperform short patterns** — measure height as % of breakout price
- **Wide patterns outperform narrow patterns** for most pattern types
- **High volume at breakout** significantly improves success rate
- **Patterns in lower 1/3 of yearly price range** (for bullish) perform better
- **Patterns in upper 1/3 of yearly price range** (for bearish) perform better
- **Pullbacks/throwbacks hurt performance** — if a pullback occurs, wait for price to resume trend before adding

---

## Pattern Identification Quick Reference

### Bullish Patterns (Buy Signal) — Best Performers First

| Pattern | Avg Rise (Bull Mkt) | 5% Fail Rate |
|---------|-------------------|--------------|
| High and Tight Flag | ~69% | ~17% |
| Bump-and-Run Reversal Bottom | ~55% | ~2% |
| Pipe Bottom | ~45% | ~5% |
| Rounding Bottom | ~44% | ~5% |
| Head-and-Shoulders Bottom | ~37% | ~3% |
| Triple Bottom | ~37% | ~9% |
| Double Bottom (Adam & Eve) | ~37% | ~7% |
| Wedge, Falling | ~38% | ~9% |
| Rectangle Bottom | ~38% | ~10% |
| Double Bottom (Adam & Adam) | ~35% | ~10% |
| Cup with Handle | ~34% | ~3% |
| V-Bottom | ~35% | — |
| Diamond Bottom | ~35% | ~7% |
| Ascending Triangle | ~35% | ~10% |
| Measured Move Up | ~34% | — |
| Pennant | ~25% | ~8% |
| Flag (bull) | ~23% | ~4% |

### Bearish Patterns (Short Signal) — Best Performers First

| Pattern | Avg Decline (Bull Mkt) | 5% Fail Rate |
|---------|----------------------|--------------|
| Bump-and-Run Reversal Top | ~24% | ~5% |
| Pipe Top | ~23% | ~6% |
| Diamond Top | ~20% | ~7% |
| Head-and-Shoulders Top | ~19% | ~19% |
| Broadening Wedge, Ascending | ~21% | ~12% |
| Cup with Handle, Inverted | ~21% | ~8% |
| Triple Top | ~19% | ~10% |
| Double Top (various) | ~17–18% | ~9–12% |
| Wedge, Rising | ~19% | ~14% |
| Rectangle Top | ~17% | ~14% |
| Descending Triangle | ~19% | ~12% |

---

## Bear Market Adjustments

In bear markets, all statistics shift:
- **Bullish patterns**: Higher failure rates; lower average gains
- **Bearish patterns**: Lower failure rates; larger average declines
- **General rule**: Reduce position size on bullish patterns in bear markets
- **Busted bearish patterns** (break down then recover) can be very profitable in bull markets

---

## Glossary of Key Terms

| Term | Definition |
|------|-----------|
| **Ultimate high** | Highest price before declining 20% from the high (exit for bullish trade) |
| **Ultimate low** | Lowest price before rising 20% from the low (cover for bearish trade) |
| **Breakout** | When price closes beyond the pattern's confirmation boundary |
| **Throwback** | After upward breakout, price returns to the breakout level |
| **Pullback** | After downward breakout, price returns to the breakout level |
| **Busted pattern** | Pattern breaks out then reverses through the other side |
| **5% failure rate** | % of patterns that fail to move 5% after breakout |
| **Measure rule** | Price target = pattern height added to (or subtracted from) breakout price |
| **Adam valley** | Sharp, narrow V-shaped trough |
| **Eve valley** | Wide, rounded trough |
| **Lead-in trendline** | The baseline trend in bump-and-run patterns |
| **Neckline** | The confirmation line in head-and-shoulders patterns |
| **Flagpole** | The sharp price move before a flag or pennant |
| **Lip** | The resistance/confirmation level of a cup with handle |

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## When to Use This Skill

Invoke this skill when the user asks to:
- **Identify a chart pattern** from a description or chart
- **Analyze performance statistics** of any of the 76 patterns
- **Get trading tactics** (entry, stop, target) for a pattern
- **Compare patterns** to determine which to trade
- **Understand why a pattern failed**
- **Find the best-performing patterns** in current market conditions
- **Apply the measure rule** to calculate a price target
- **Determine if a pattern is busted** and how to trade it

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*Based on: Thomas N. Bulkowski, "Encyclopedia of Chart Patterns," 3rd Edition, John Wiley & Sons, 2021. Statistics are derived from 150,000+ samples across 1,396 stocks from 1991–2020.*