Candles Before breakout

[Muhammad Elbermawi]

Thomas Bulkowski is leading technical analyst wither in his tough or in his capabilities. His website www.thepatternsite.com is a very important source of information for a lot of traders and technical analysts all over the world. He is well known by doing researches on the validity of technical analysis tools that is used by thousands of investors.  He is also the writer of two Encyclopedias about Classic Chart patterns & Japanese Candle sticks.

In his article "Bulkowski Candle and Chart Pattern Breakout" that you can find HERE Thomas tried to give an answer to this question "What is the most common Candlestick pattern that appears before the break out of Classic Chart pattern?"  Of course, if we knew this candle we can interpret breakout from chart patterns like Head & shoulders, channels . . .  with high degree of success, this also if true will give us an advantage to enter before the breakout with some degree of success. So please read the article from HERE if you depend on candlesticks and chart patterns in your trading style.

I want here to share with you what I found from the statics and tables Thomas show us in this article.

I found that Marubozo  & Doji is mentioned several times, and it seem to me that several variation from those two candlesticks appear before chart pattern breakout much more than any other candlestick patterns.

I wanted to know how much percent they appear in general so I build an excel sheet in which I summed the percent of appearance wither before bullish or bearish breakouts. Here are results:

1-      For Up breakouts:



2-    For Down Breakouts:



By summing up the results we can say that in Bullish breakout Marubozo candlesticks with different varieties may appear 29.1% of the time, while Doji candlesticks may appear 12.8% of the time.

And by summing up the results we can say that in Bearish breakout  Marubozo candlesticks with different varieties may appear 22% of the time , while Doji candlesticks may appear 13.2% of the time.

This means that those to candlesticks families have the highest frequency of appearance before chart pattern breakout but this do not give us a strong edge in trading as Thomas mentioned at the end of his article.

So in the next time you see a chart pattern building in-front of your eyes think wait for a Marubozo or a Doji to confirm that breakout become to close to happen.

Regards

MB