|
|
|
|
The three rising valleys chart pattern is one you will often see in the stock market and other
markets. The reason for this begins with the rules for identification, where almost any three
rising valleys qualify for a valid pattern. It is slightly more complicated than that with each
succeeding valley resting above the prior one and the three valleys appearing similar. But
beyond that, anything goes.
The chart pattern is a decent performer in a bull market and it confirms as a valid
chart pattern when price closes above the highest peak in the pattern. For more information,
see pages 698 to 710 in the book
Encyclopedia of Chart Patterns, Second Edition, and the following...
|
|
|
|
|
|
|
|
|
|
|
Important Bull Market Results
Overall performance rank (1 is best): 4 out of 23
Break even failure rate: 5%
Average rise: 41%
Throwback rate: 60%
Percentage meeting price target: 58%
Identification Guidelines
|
Characteristic |
Discussion |
|
Weekly or daily |
The pattern appears on either
the daily or weekly chart. |
|
Price trend |
Upward leading to the pattern. |
|
Shape |
Look for 3 rising valleys
– each valley must be above the prior one. |
|
Proportional |
Each valley should look similar.
Select all narrow ones or all wide ones, all short, or all tall. Don’t mix them. |
|
Volume |
Trends downward 67% of the
time |
|
Confirmation |
The pattern confirms when
price closes above the highest peak the pattern. |
Trading Tips
|
Trading Tactic |
Explanation |
|
Measure rule |
Reference the left figure above (Measure Rule). Compute
the height from the highest peak (2) to the lowest
valley (1) (between the 3 valleys of the three rising
valleys chart pattern) and then
multiply it by the above “percentage meeting price target.”
Add the difference to the highest peak (2) in the 3rv
to get a price target (3). The link to the left
provides more information on the measure rule. |
|
Early entry |
Reference the above right figure (Early Entry). If the
highest peak (point A) in the three rising valley
chart pattern is between
the first two valleys (1 and 2), then draw a down-sloping trendline connecting the
two highest peaks in the 3rv chart pattern. A close above the trendline signals a
buy. |
|
Stop |
Reference the above right figure (Early Entry). Place a
stop slightly below the last minor low (point 3) in the three rising valleys chart
pattern. The link to the left discusses stop placement in depth.
|
|
Yearly high |
Patterns that breakout within
a third of the yearly high perform best. |
|
Reversals |
Patterns that act as reversals
perform better than continuations. The link to the left discusses this finding as
the result of a study of studies. |
|
Volume trend |
Patterns with volume trending upward perform better.
The link to the left discusses this and gives an example. Here is another
link that discusses
results of a study. |
|
Breakout volume |
Below average breakout volume suggests better performance for this chart pattern.
For more information, click the link to the left. |
|
Throwback |
Throwbacks hurt performance. The link to the left defines a throwback. This
link discusses performance. |
|
Gain |
The farther up the price trend the
pattern appears, the smaller the potential gain. These two,
Study 1 and
Yearly low discuss the
findings. |
Example
The above figure shows an example of the three rising valleys chart pattern. Valleys 1, 2, and 3 mark the outline of
the chart pattern. Point 4 is the confirmation price, the price at which squiggles on the chart become a three rising
valleys chart pattern.
Taking the height from peak 4 (the highest high in the three rising valleys chart pattern) and valley 1 (the lowest
low between the three valleys), multiplying it by 58% (the percentage meeting price target from Important Bull Market
Results table near the top of this page) gives a target of about 45. The stock climbed to the target a few weeks after
the breakout.
|
|
|
|
|
They pay for the referral on most items and that helps pay for the cost of this site.
