From the Inside Flap

How many times have you used a screwdriver when a chisel would work best? Or wondered if you could substitute baking powder for baking soda? Having the correct tool or ingredient available when you need it certainly helps, but the key to success is knowledge of how to select the best tool for the job and the skill to use that tool effectively.

Owning the Encyclopedia of Chart Patterns, Third Edition, means you’ll have the tools available when you need them but also the knowledge from decades of experience with chart patterns. Inside the pages of this easy-to-read and easy-to-use reference you’ll:

• Gain essential knowledge of chart patterns and how they are used to predict future price movements
• Discover new tables including how often stops loss orders are hit, busted pattern performance, performance of chart patterns over each of the past three decades, and special features unique to the chart pattern
• Share lessons learned from Bulkowski’s trades in a new section called Experience, Joining Tour, Identification Guidelines, Focus on Failures, Statistics, Trading Tactics and Sample Trade
• Find statistics from nearly four times the number of samples used in the Second Edition and ten times the number in the First Edition

Perfect for stock traders and investors devoted to technical analysis, the Third Edition of the Encyclopedia of Chart Patterns will also earn a place in the libraries of professional investors and fund managers seeking valuable information into the future behavior of stock prices.

From the Back Cover

The market’s bestselling and most comprehensive reference on chart patterns, backed by statistics and decades of experience

When the smart money trades stocks, they leave behind financial footprints. Combine enough footprints together and you have a trail to follow. That trail becomes what’s called a chart pattern. Encyclopedia of Chart Patterns, Third Edition, expands upon Bulkowski’s immensely popular Second Edition with fully revised and updated material on chart patterns. Whether you’re new to the stock market or an experienced professional trader, use this book as a reference guide to give you an edge.

Within the pages of this book, you’ll learn how to identify chart patterns, supported by easy-to-understand performance statistics describing how well a pattern works, what the failure rate is, and what special quirks suggest better future performance. You’ll discover how often a stop loss order will trigger, how the chart pattern’s performance has evolved over the past three decades, and how to profit from failure by trading busted patterns.

Written by a leading expert on chart patterns, Thomas Bulkowski, this edition includes revised statistics on 75 chart patterns including 23 new ones, with charts and performance statistics, packaged within easy-to-read text. The Encyclopedia of Chart Patterns, Third Edition further solidifies the reputation of this book as the leading reference on chart patterns.

Preface to the First Edition ix

Preface to the Second Edition xiii

Preface to the Third Edition xv

Acknowledgments xix

Introduction 1

1 How to Trade Chart Patterns 9

2 AB=CD®, Bearish 27

3 AB=CD®, Bullish 36

4 Bat®, Bearish 44

5 Bat®, Bullish 52

6 Big M 60

7 Big W 77

8 Broadening Bottoms 95

9 Broadening Formation, Right-Angled and Ascending 114

10 Broadening Formation, Right-Angled and Descending 132

11 Broadening Tops 153

12 Broadening Wedge, Ascending 175

13 Broadening Wedge, Descending 192

14 Bump-and-Run Reversal, Bottom 208

15 Bump-and-Run Reversal, Top 227

16 Butterfly®, Bearish 245

17 Butterfly®, Bullish 255

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xxii Contents

18 Cloudbanks 263

19 Crab®, Bearish 277

20 Crab®, Bullish 286

21 Cup with Handle 294

22 Cup with Handle, Inverted 311

23 Diamond Bottoms 326

24 Diamond Tops 344

25 Diving Board 362

26 Double Bottoms, Adam & Adam 379

27 Double Bottoms, Adam & Eve 398

28 Double Bottoms, Eve & Adam 419

29 Double Bottoms, Eve & Eve 438

30 Double Tops, Adam & Adam 458

31 Double Tops, Adam & Eve 476

32 Double Tops, Eve & Adam 494

33 Double Tops, Eve & Eve 510

34 Flags 526

35 Flags, High and Tight 542

36 Gaps 555

37 Gartley, Bearish 568

38 Gartley, Bullish 577

39 Head-and-Shoulders Bottoms 585

40 Head-and-Shoulders Bottoms, Complex 601

41 Head-and-Shoulders Tops 618

42 Head-and-Shoulders Tops, Complex 636

43 Horn Bottoms 653

44 Horn Tops 668

45 Island Reversals 682

46 Measured Move Down 699

47 Measured Move Up 713

48 Pennants 726

49 Pipe Bottoms 743

50 Pipe Tops 760

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Contents xxiii

51 Rectangle Bottoms 773

52 Rectangle Tops 792

53 Roof 811

54 Roof, Inverted 825

55 Rounding Bottoms 839

56 Rounding Tops 855

57 Scallops, Ascending 871

58 Scallops, Ascending and Inverted 888

59 Scallops, Descending 903

60 Scallops, Descending and Inverted 921

61 Three Falling Peaks 936

62 Three Peaks and Domed House 952

63 Three Rising Valleys 960

64 Triangles, Ascending 976

65 Triangles, Descending 997

66 Triangles, Symmetrical 1019

67 Triple Bottoms 1040

68 Triple Tops 1057

69 V-Bottoms 1075

70 V-Bottoms, Extended 1089

71 V-Tops 1104

72 V-Tops, Extended 1118

73 Wedges, Falling 1131

74 Wedges, Rising 1148

75 Wolfe Wave®, Bearish 1164

76 Wolfe Wave®, Bullish 1174

Statistics Summary missing 1184

Glossary 1197

Visual Index of Chart Patterns 1212