Bulkowski’s Partial Declines

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Partial declines are looping chart patterns that appear at the end of broadening patterns and rectangles. They predict an immediate upward breakout but are not always correct.

Identification Guidelines

Trading Tips

Patterns

Example

Partial decline example

Identification Guidelines

Characteristic	Discussion
Established	The rectangle or broadening chart pattern should be an established one, meaning that it should obey all of the identification guidelines for that pattern. Don’t look for a partial decline until you have a completed rectangle or broadening chart pattern.
Top trendline	Price should touch the top trendline and move down but not touch or come that close to the bottom trendline before heading back up. When price touches the upper trendline, it usually stages an immediate upward breakout. Sometimes, it may linger at the upper trendline before breaking through. If price bounces downward, close out your position.
Breakout	Upward. This usually occurs immediately after the partial decline touches the upper trendline.
Pause	Price often pauses partway across a chart pattern so it may look like a partial decline is forming. Wait for price to head back up before buying the stock.

Trading Tips

Trading Tactic	Explanation
Price loop	If price bounces off the upper trendline and heads back down, then rounds over before coming close to the bottom trendline, then it may be a partial decline. Short once it’s clear that price is heading back toward the upper trendline.
Fibonacci	A trend reversal at the 50% or 62% Fibonacci retrace of the prior up move may signal a partial decline.
Pause	Price may pause at the upper trendline, perhaps slide along it before breaking out upward.
Exit	Exit your position if price bounces off the upper trendline and heads back down.
Breakout	Expect an upward breakout after a partial decline.

Patterns

The following table shows how often a partial decline correctly predicts an upward breakout in bull markets.

Chart Patterns	Partial Decline Success Rate in Bull Markets
Broadening bottoms	80%
Broadening formations, right-angled and ascending	81%
Broadening formations, right-angled and descending	63%
Broadening tops	72%
Broadening wedges, ascending	35%
Broadening wedges, descending	87%
Rectangle bottoms	80%
Rectangle tops	91%

Example

Partial decline in a broadening bottom chart pattern

The above figure shows an example of a partial decline in a broadening bottom chart pattern. By the time the partial decline appeared, the broadening bottom had enough trendline touches to qualify as a valid chart pattern. Price attempted to touch the bottom trendline but did not make it. The reversal suggested an upward breakout was in the offing and that was exactly what happened.