Bulkowski’s Failure Swings

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Look for M-shaped failure swings that span the trigger line in the indicator. The above picture shows the Wilder relative strength index (RSI) with the failure swing spanning the 70 overbought signal line (the horizontal line at 70). The stock begins its turn as the failure swing forms. Notice that the second peak of the failure swing doesn't rise above the first peak. It fails to swing higher, indicating a weakening technical picture and a potential trend change. The example pictured is taken from an actual stock/indicator pair. Various shapes for the failure swing appear to the left in the above chart. Some analysts argue that the failure swing must span the trigger line (70), but you can find numerous examples where that is not the case and yet price changes trend. Failure swings occur in indicators other than the RSI, too.

Look for W-shaped failure swings that span the trigger line in the indicator. The above picture shows the Wilder relative strength index ( RSI) with the failure swing spanning the oversold signal line (the horizontal line at 30). The stock begins its turn as the failure swing forms. The example shown in the chart is taken from an actual stock/indicator pair. Various shapes for the failure swing appear to the left. Some analysts argue that the failure swing must span the trigger line (30), but you can find numerous examples where that is not the case and yet price changes trend. Failure swings also occur in indicators other than the RSI.