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Pipe Bottoms


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Pipe Bottoms

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 DonStar 
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Hi All: First, I want to wish everyone a Happy and prosperous 2012. I have been spending most of my time on futures.io (formerly BMT) reading and observing. This journal will be my 1st attempt at getting involved. I appreciate that such a great forum exists and have nothing but hope for the year ahead of us.

I have been looking at Pipe Bottom formations and thought I would spend some time this topic. Hopefully others will have experience and/or thoughts about it.

Pipe Bottoms were popularized by Thomas Bulkowski and it is through his book "Encyclopedia of Chart Patterns" and his web site thepatternsite.com that I have gained what little knowledge I have about them.

Two adjacent downward price spikes compose the pipe bottom, and it looks like two parallel lines on the chart. A major drawback of this pattern is that Bulkowski suggests that you use weekly charts to identify and trade this pattern. Although pipes appear on daily charts, they do not perform as well as pipes on weekly charts (he says).

This week pipe bottom formations are forming on 5 stocks: ANN, GILD, LTD, LSI and PDCO.

As I move forward with this journal, I hope to follow these setups initially and others that follow. I am looking forward to learning and understanding more as I go along.

I have already noted something I think is very interesting on GILD. Although the recommendation is to use weekly charts, as I was looking at the daily chart on GILD there is a very nice daily pipe bottom (PB) that preceded the weekly PB. I don't know what this means, if anything, but I think it is worth a look.

I will get some charts posted as well as follow-up with rules and guidelines for this set up.

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 DonStar 
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Pipe Bottom Characteristics/Guidelines

Weekly Chart: The first guideline suggests that you use weekly charts. Although pipes appear on daily charts, they do not perform as well as pipes on weekly charts.

Two downward adjacent spikes: Two adjacent downward price spikes compose the pipe bottom, and it looks like two parallel lines on the chart.

Large spikes: The pipe spikes should appear as a large price drop and wide price range for 2 weeks in a row. The week before and after the pipe should have low prices near the top of the pipe. This characteristic makes the pipe stand out on the price chart as an easily recognizable formation. The spike decline should be unusual. The length should be well above the average downward spike length over the past year. It must appear as a large decline on the price chart, not just another 2-week blip in a sea of long downward price spikes.

Large overlap: The pipe has a large price overlap. As a selection guideline, you do not want to see a large left side and a short right side.

High volume: Volume for each pipe spike is usually above average but need not be. Pipes with above average left volume and below average right volume perform better than all other combinations. However, do not exclude a pipe simply because it does not obey the volume characteristics.

Obvious pipe: The pipe must be unusual enough to jump out of the price chart. Typically, pipes form at the end of a decline and mark a turning point. Less frequently, pipes act as a consolidation of the upward trend. They spike downward for 2 weeks, then prices continue rising.

Wait for confirmation: The twin bottom pattern confirms as a pipe bottom only when price closes above the highest high in the pattern. Do not invest in a pipe without confirmation.

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 DonStar 
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On this weekly chart of ANN the Pipe Bottom bars don't look like they have long enough spikes. The stock is not in an established downtrend. And it does not look like price will confirm by closing above the highest high of the two pipes.

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 vvhg 
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Wouldn't the low about 20 bars back fit the description you gave quite well?

Vvhg

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 DonStar 
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Yes vvhg. I agree with you. There are several previous potential setups on these charts when you look back at them.

I will use current setups as my starting point and move forward from here. Good observation though...

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 DonStar 
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Out of the 5 patterns watched this week, 4 of them failed to confirm by closing higher than the highest high of the two spikes that make up the pipe bottom formation.

GILD did confirm by closing higher. So the next move is to buy GILD on the next trading day (usually Monday).

I want to look at strategies for entering the trade. Maybe use a smaller timeframe to select best entry.

The stop should be placed slightly below the low of the formation (pipe bottoms tend to act as support).

I also want to look at developing a scanning tool to mine potential setups.

More as this develops...

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 DonStar 
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Okay, here is an update on the pipebottoms.

Of the 5 pipebottoms identified, only one confirmed it's pattern last Friday (GILD).

I put in a buy at market order to purchase 10 May Call options. This order filled at $2.89 for a purchase price of $2,890.00.

Today GILD closed at $4.20 for a one-week gain of 45.33%

See attached chart.

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 DonStar 
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Compute the height from the taller of the two spikes to the lower of the two (the AB distance).
[This number is 2.35]


Then multiply by the “percentage meeting price target (83%).”
[1.95]


Add the difference to the higher of the two (A) to get a price target, C.
[41.28]


Using this calculation we, we have met our target price. Today’s close was 42.78

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 kbit 
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I know I'm veering off course a little by not showing a weekly.
This is a ES tick chart with what I would call a pipe bottom....do you agree, additionally do you have any stats on success rates of lower time frames ?
just curious.
Kbit

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 DonStar 
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Kbit : You are not off topic at all. Thanks for joining in. See the day chart I posted in #1 above.

Yes, this looks like a beautiful pipebottom.

According to Bulkowski, he conducted an in-depth study of pipe bottoms on daily price charts and came up disappointed. His statistics indicated that daily pipes have a failure rate of 18% with an average gain of 33%. Almost half the formations (45%) had gains less than 20%. However, there were a number of large gains; almost a quarter of the formations (23%) had gains over 50%.

But you have a nice formation with a great gain.

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 DonStar 
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Here is an update on GILD. Recall this is the only one of five possible pipe bottom formations that confirmed last week. I have been meaning to post updates on the four that did not confirm their patterns but have been short on time this week. Depending on how many potential formations we look at this weekend and the kind of time I have, I might be able to update tem also.

So, I bought GILD on the open on Tuesday, 3 January after the stock confirmed its pipe bottom formation on Friday, December 30th. Keep in mind these are weekly charts and Bulkowski recommends trading pipe bottoms only on weekly charts.

Since the open at 41.46 we have gone straight up and closed today at 44.89.

I am still working on decent exit strategies. For now I will place a stop just below this bar’s low at 42.30.

More later…

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 kbit 
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Hi Donstar, Since you brought these pipe bottoms to my attention I have been noticing more and more of them.

I generally look at tick charts mainly on ES and TF and it seems like a good signal even though it's a much smaller time frame. I had a loosely defined one on TF today.
Just wanted to say thanks for bringing them to my attention....I had noticed them previously but didn't think to much about them.

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 DonStar 
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GILD continues to move up nicely, closing the week at 47.44. I bought 10 May 19 Calls on Tuesday, 3 Jan after the pipebottom formation confirmed by closing above the 23 Dec weekly high of 39.29. The cost of the May 19 call was 2.89. It closed today at 7.85. This represents a gain (for today) of 171.63%.

4 new pipebottom patterns this week:
CCRN
LTD
OXM
VLO

CCRN needed to close above 5.76, the highest high of the two pipes in the formation--which it did by closing at 6.00. That means this formation is confirmed and I will place a market order to buy at the open on Monday.

LTD needed to close above 41.41, the highest high of the two pipes in the formation--which it did not. It closed at 41.22. Close, but no cigar. I will pass on LTD.

OXM needed to close above 47.74, the highest high of the two pipes in the formation--which it did. It closed at 49.00. The formation confirmed and I will place a market order to buy at the open on Monday.

VLO needed to close above 21.39, the highest high of the two pipes in the formation--which it did. It closed at 23.51. The formation confirmed and I will place a market order to buy at the open on Monday.

3 of the 4 formations confirmed. I will place these orders and we will see how do.

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 DonStar 
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Here is a snapshot of GILD's gains and the orders ready for Monday's open.

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 DonStar 
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Still in GILD. Bought on Jan 2nd at 2.89, closed today at 7.80. So far this represents a 169.90% Gain.

Bought VLO today at 23.46. Closed at 23.52. Up 0.26%

Bought OXM today at 48.61. Closed at 48.70. Up 0.19%

Bought CCRN today at 6.01. Closed at 6.05. Up 0.67%.

The pipe bottom formation is traded on the weekly chart, so we will see how they do this week.

I am still looking for an exit strategy and would like to hear if anybody has any ideas...

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 DonStar 
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Here is an idea for an exit strategy:

On the weekly chart, place the Stop at the low of the last completed weekly bar. In the case of GILD, this would be the low of the week ending Friday, January 20th (44.87). See chart # 1 below.

Then on the daily chart (Chart # 2 below) any close below the weekly close = exit at the market on the next days open.

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 madLyfe 
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DonStar View Post
Here is an idea for an exit strategy:

On the weekly chart, place the Stop at the low of the last completed weekly bar. In the case of GILD, this would be the low of the week ending Friday, January 20th (44.87). See chart # 1 below.

Then on the daily chart (Chart # 2 below) any close below the weekly close = exit at the market on the next days open.

you can place the entry and exit trades at the end of the day where know its going to close above or below the lines(last 5mins of session).. this would reduce your risk of perhaps a large gap the next day where you would give up profit on a bad exit or late entry..

dont believe anything you hear and only half of what you see

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 DonStar 
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I had oral surgery yesterday so I wasn't feeling up to posting an update.

Stock Bought Price Current Gain/ (Loss)
GILD 1/2/2012 2.8 8.90 6,010.00 207.96%
VLO 1/23/2012 23.46 24.12 66.00 2.81%
OXM 1/23/2012 48.61 49.24 63.00 1.30%
CCRN 1/23/2012 6.01 6.35 34.00 5.66%

So far (knock on wood) all trades are winning.

This week Mr. Bulkowski gave is two potential pipe formations (PSSI & SKS). One of them confirmed and one of them did not.

Remember to wait for confirmation: The twin bottom pattern confirms as a pipe bottom only when price closes above the highest high in the pattern. Do not invest in a pipe without confirmation. Because PSSI confirmed, I will place a market order to buy on the Monday open.

The pipe bottom formation is traded on the weekly chart, so we will see how they do this week.

I am still looking for an exit strategy and would like to hear if anybody has any ideas...

GILD continues to make outstanding Gains. This week's low was 47.02. I will move the stoploss up to 47.00.

Any feedback you all have would be greatly sppreciated...

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 madLyfe 
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I had oral surgery yesterday so I wasn't feeling up to posting an update.

Stock Bought Price Current Gain/ (Loss)
GILD 1/2/2012 2.8 8.90 6,010.00 207.96%
VLO 1/23/2012 23.46 24.12 66.00 2.81%
OXM 1/23/2012 48.61 49.24 63.00 1.30%
CCRN 1/23/2012 6.01 6.35 34.00 5.66%

So far (knock on wood) all trades are winning.

This week Mr. Bulkowski gave is two potential pipe formations (PSSI & SKS). One of them confirmed and one of them did not.

Remember to wait for confirmation: The twin bottom pattern confirms as a pipe bottom only when price closes above the highest high in the pattern. Do not invest in a pipe without confirmation. Because PSSI confirmed, I will place a market order to buy on the Monday open.

The pipe bottom formation is traded on the weekly chart, so we will see how they do this week.

I am still looking for an exit strategy and would like to hear if anybody has any ideas...

GILD continues to make outstanding Gains. This week's low was 47.02. I will move the stoploss up to 47.00.

Any feedback you all have would be greatly sppreciated...

are you buying options on these?

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 DonStar 
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I bought an option on GILD.

The others are stocks.

Don

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 madLyfe 
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I bought an option on GILD.

The others are stocks.

Don

how far out are you buying when entering? or i guess i could just ask what kinda option strategy are you using?

dont believe anything you hear and only half of what you see

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 DonStar 
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Hi madLyfe: I used just a straight call. On Jan 2nd 2012 I bought a May 41 GILD call. Bought at 2.80. I is up about %6000.00

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 madLyfe 
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ok thanks for the update.. i know you havnt come out with an exit strategy yet, but would you just roll it come expiration if it was still in your favor? im just wonder about the options side of things and if weeklies could fit in here.. giving the percent winners you could really pick up some decay in that last week(if you only wanted to be in them a week at a time).. i see your on TOS, have you come up with a scan yet to look for the pipes? im guessing they work equally well as for 'pipe tops' too..

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 kbit 
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Just nosing around and thought I might post another example ...this one is a daily on the TF

It seems to me that they work well on more than just weekly charts from what I have been seeing...I have seen a few of them on my tick charts as well and they all were all good trades.

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 madLyfe 
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Just nosing around and thought I might post another example ...this one is a daily on the TF

It seems to me that they work well on more than just weekly charts from what I have been seeing...I have seen a few of them on my tick charts as well and they all were all good trades.

is there an exact definition for these bar patterns? i see some that look close and it would be nice to have the exact definition so i could maybe make a TOS scan outa it..

dont believe anything you hear and only half of what you see

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 kbit 
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is there an exact definition for these bar patterns? i see some that look close and it would be nice to have the exact definition so i could maybe make a TOS scan outa it..


I don't know that there is an exact definition...for me it's just a know it when you see it deal.

There probably is something that says the two bars must be about the same size within some percentage type thing but I don't know what that might be.....just don't know enough about it myself

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I don't know that there is an exact definition...for me it's just a know it when you see it deal.

There probably is something that says the two bars must be about the same size within some percentage type thing but I don't know what that might be.....just don't know enough about it myself

ok i guess we'll have to wait for @DonStar to maybe full us in.. i see he's on TOS as well so maybe he's come up with something..

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 DonStar 
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kbit: I agree that they can work just as well on lower time frames.

madLyfe: If you look at some of the earlier posts, I gave Bulkowski's definitions.

Also, I only used an option as a fluke. No real strategy around it. I have straight trades for all but the 1st one.

I am looking into developing a scan to locate these (hopefully, just before the weekly completes forming). Any ideas for language to develop a scan would be appreciated...

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 madLyfe 
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kbit: I agree that they can work just as well on lower time frames.

madLyfe: If you look at some of the earlier posts, I gave Bulkowski's definitions.

Also, I only used an option as a fluke. No real strategy around it. I have straight trades for all but the 1st one.

right i was just wondering if you use options and if so how.. once you get a high probability setup, extracting the money is secondary. i will go back and reread to get the info, thanks.

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 madLyfe 
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hmm that might be tough to put into a scan.. there seems to be a whole lot of 'feel' to the pattern..

dont believe anything you hear and only half of what you see

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 DonStar 
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All trades that I have entered to date based on pipe bottom formations (knock on wood) continue to advance.

Right now, I'm not sure if it is from the strength of the pipe bottom formations or just that the market (as a whole) has been doing well and "all boats are rising."

GILD: Bought a $41 May Call @ $2.89 on 2 Jan 11. The Call option closed today @ $14.35. Sitting on a 397% gain. Moving the Stop up to just below this week's low of $48 ($47.90). This has been a good trade.

VLO: Bought @ $23.46 on Jan 23rd. Weekly close today @ $24.63. A gain of 4.99%.

OXM also bought on Jan 23rd @ $48.61. It closed this week @ $51.20. This represents a 5.33% gain.

I paid $6.01 for the 3rd stock I bought on Jan 23rd - CCRN. The stock closed this week @ $6.71 for a total gain of 11.65%.

Last week one formation confirmed. I bought it on Monday morning, Jan 30th at the market open. I was filled @ $24.51. This week PSSI closed @ $25.86, a 5.51% gain.

So, all open stock positions give me a 5.66% return on investment. I am not including the huge advance on the GILD option.

This week the Bulkowski website gave two pipe bottom formations: NBR and TUES.

NBR: Highest high of the two pipes = $18.23. The weekly close was $19.54. The close clearly is above the highest high of the two pipes and confirms the formation.

TUES: Highest high is $3.32. The weekly close of $3.76 confirms this formation also.

This week I want to look a little closer at TUES. It could just as well be NBR but TUES will do.

First: I am continuing my efforts to develop a scan for the two weekly pipes (need help on this please!). On his website, Bulkowski is giving us pipes that have already formed, we just don't know whether or not they will confirm because he gives us the stocks during the confirmation week.

What if the pipe bottom formation was identified (prior to confirmation) on a weekly chart and then the daily chart is used to confirm and enter the trade. The risk is that we confirm a trade before we know the weekly close (which is the stated/preferred method of confirmation). But it looks like the benefits could outweigh the risks.

Chart 1 is a weekly chart of the TUES pipe bottom formation as soon as it has completed development (at the end of the 2nd week).

Chart 2 is a daily chart of TUES. The pipe bottoms are still visible. Also visible is the confirmation line (see chart 1) which is the highest high of the two pipes (in this case $3.32).

What if, after identifying the two pipe bottoms and the confirmation line on the weekly chart, we switch to the daily chart and enter using the same rule as the weekly (a close above the highest high of the two pipes) only do so using the daily prices.

In the case of TUES, using this potential daily confirmation, the formation would have confirmed on Tuesday at a price of $3.40 after closing above the confirmation line at $3.32. In this scenario, we would have entered the trade at the market on the open Wednesday, Feb 1st. Just for purposes of discussion, let's say we fill at $3.50 (which is probably a pretty bad fill given the open was $3.41).

We still have Thursday and Friday's trading (which raised our position from $3.30 to $3.76. Keep in mind that as it stands right now, we are set to enter at market on Monday.

I haven't done any formal testing but just eyeballing this looks promising.

Just a few thoughts.

Any feedback?

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 kbit 
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DonStar View Post
All trades that I have entered to date based on pipe bottom formations (knock on wood) continue to advance.

Right now, I'm not sure if it is from the strength of the pipe bottom formations or just that the market (as a whole) has been doing well and "all boats are rising."

GILD: Bought a $41 May Call @ $2.89 on 2 Jan 11. The Call option closed today @ $14.35. Sitting on a 397% gain. Moving the Stop up to just below this week's low of $48 ($47.90). This has been a good trade.

VLO: Bought @ $23.46 on Jan 23rd. Weekly close today @ $24.63. A gain of 4.99%.

OXM also bought on Jan 23rd @ $48.61. It closed this week @ $51.20. This represents a 5.33% gain.

I paid $6.01 for the 3rd stock I bought on Jan 23rd - CCRN. The stock closed this week @ $6.71 for a total gain of 11.65%.

Last week one formation confirmed. I bought it on Monday morning, Jan 30th at the market open. I was filled @ $24.51. This week PSSI closed @ $25.86, a 5.51% gain.

So, all open stock positions give me a 5.66% return on investment. I am not including the huge advance on the GILD option.

This week the Bulkowski website gave two pipe bottom formations: NBR and TUES.

NBR: Highest high of the two pipes = $18.23. The weekly close was $19.54. The close clearly is above the highest high of the two pipes and confirms the formation.

TUES: Highest high is $3.32. The weekly close of $3.76 confirms this formation also.

This week I want to look a little closer at TUES. It could just as well be NBR but TUES will do.

First: I am continuing my efforts to develop a scan for the two weekly pipes (need help on this please!). On his website, Bulkowski is giving us pipes that have already formed, we just don't know whether or not they will confirm because he gives us the stocks during the confirmation week.

What if the pipe bottom formation was identified (prior to confirmation) on a weekly chart and then the daily chart is used to confirm and enter the trade. The risk is that we confirm a trade before we know the weekly close (which is the stated/preferred method of confirmation). But it looks like the benefits could outweigh the risks.

Chart 1 is a weekly chart of the TUES pipe bottom formation as soon as it has completed development (at the end of the 2nd week).

Chart 2 is a daily chart of TUES. The pipe bottoms are still visible. Also visible is the confirmation line (see chart 1) which is the highest high of the two pipes (in this case $3.32).

What if, after identifying the two pipe bottoms and the confirmation line on the weekly chart, we switch to the daily chart and enter using the same rule as the weekly (a close above the highest high of the two pipes) only do so using the daily prices.

In the case of TUES, using this potential daily confirmation, the formation would have confirmed on Tuesday at a price of $3.40 after closing above the confirmation line at $3.32. In this scenario, we would have entered the trade at the market on the open Wednesday, Feb 1st. Just for purposes of discussion, let's say we fill at $3.50 (which is probably a pretty bad fill given the open was $3.41).

We still have Thursday and Friday's trading (which raised our position from $3.30 to $3.76. Keep in mind that as it stands right now, we are set to enter at market on Monday.

I haven't done any formal testing but just eyeballing this looks promising.

Just a few thoughts.

Any feedback?

They definitely know more about these pipes than I do...if you hadn't told me that was a pipe bottom I never would have guessed...it's either that or they are stretching the definition and got lucky.

looks like it's going up though so can't argue with that.

In regards to going down to daily...it sounds like a good idea to me

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 DonStar 
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kbit View Post
They definitely know more about these pipes than I do...if you hadn't told me that was a pipe bottom I never would have guessed...it's either that or they are stretching the definition and got lucky.

looks like it's going up though so can't argue with that.

In regards to going down to daily...it sounds like a good idea to me

Thank you kbit.

I agree with you that some of the formations don't "stand out" the way I expect them to.

Like I said, I am working on a way to scan for these and select them myself. I'm guessing I will be more conservative when deciding whether or not to call some of these "Pipe Bottom" formations using my own definitions.

Thanks for your input.

Don

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 madLyfe 
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should call them Pipe Bombs and look for the opposite formation from the top of the chart..

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 DonStar 
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Hi madLyfe: There actually are pipe top formations. I haven't much looked into them.

Here is a link to Bulkowski's website for them: https://thepatternsite.com/pipet.html

Maybe you could take them on and give us some feedback about them.

Don

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 DonStar 
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Hi All: I am remiss in updating last week's pipe bottoms market action. I am away at a conference this week and was travelling over the weekend. I don't have the time to go into every stock tonight but I will touch on GILD and then update the rest as I have time this week.

GILD shot out of the gate like a rocket. An almost perfect setup and a very nice 410% gain right now.

I have decided to use the low of the past week as my stop loss for GILD as well as all the others. Keep in mind that I am trying to develop a system with entry and exit rules.

I have the entry rules that Bulkowski gave and I am experimenting with them. But I am pretty much settled (at least for today) on placing the stop at the weekly low of the previous week.

Chart is attached.

Happy Valentines Day!

Don

p.s. madLyfe: Thanks for changing your profile picture!

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 GridKing 
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His pattern recognition software which is free is pretty interesting, I have tried it , it takes a bit to figure it out , but once you do, it dpes what it's supposed to do imo, I believe pipes are in the filters, have to use a quote downloader which he provides if I remember correctly

edit, well it was free years ago when I tried it, looks like he has changed to almost free for downloader , but seems like there is an alternative provided



https://thepatternsite.com/patternz.html

caution https://thepatternsite.com/Trouble.html#VU0


https://www.fidelity.com/static/dcle/learning-center/documents/PipeBottomReversals_11_2003.pdf

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 madLyfe 
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DonStar View Post
p.s. madLyfe: Thanks for changing your profile picture!

careful... i might change it back!

dont believe anything you hear and only half of what you see

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 Placebo 
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Hello DonStar. Good to see you here. This is the first time i've heard about pipe bottoms and it sounds quite nice. If i am understanding this correctly its two back to back bars similar to top reversals and bottom reversals ?

Cheers

If you can visualize, it will materialize
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 DonStar 
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GridKing: Thanks for the input and the links. I read the Bulkowski article today. I have also been using Bulkowski's free software program "Patternz" I'm just trying to figure out a way to build it into my system. I am also using Amibroker and toying around with the idea of writing a scan for pipe bottoms.

madLyfe: I'm sorry! I take it all back! Please don't change the picture back!

Placebo: Do I know you from another forum? And yes, I think Bulkowski was experimenting with reversals when he hit upon the idea of Pipe Bottoms. They are basically reversals with nothing between them. Thanks for your comments.

Instead of trying to catch up with individual charts, I put together a trade log that I will update. I will post charts of interest when possible.

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 DonStar 
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Here is an interesting look at the S&P 500 from a pipe bottoms perespective.

On a weekly chart, the S&P shows a nice pipe bottom set up on Nov 25, 2011 and Dec 2, 2011. The high of Dec 2 is the buy trigger. On Dec 23, the market closed above the trigger line. The buy at market order would have placed for Tuesday, Dec 27, 2011 (Monday was a holiday).

Assuming a fill on the open at 1265.02, this trade would still be active with Friday's close at 1361.23 representing a 96.21 point Gain.

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 DonStar 
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Sorry for the long break.

I got very busy preparing to defend my dissertation and then actually defending it.

Once that was completed I had to prepare and print two copies of it for deposit into the University library.

Anyway, I once again can breathe.

Interesting that there are no pipe bottoms this week.

There are, however, four pipe tops.

HURC
NVDA
OXM
POL

I wonder if that has any significance for what is coming up in the general markets.

Don

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 ThatManFromTexas 
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DonStar View Post
Sorry for the long break.

I got very busy preparing to defend my dissertation and then actually defending it.

Once that was completed I had to prepare and print two copies of it for deposit into the University library.

Anyway, I once again can breathe.

Interesting that there are no pipe bottoms this week.

There are, however, four pipe tops.

HURC
NVDA
OXM
POL

I wonder if that has any significance for what is coming up in the general markets.

Don

Congratulations on your becoming edumencated ... just don't start showin off usin big words and spellin stuff correctly ...

I'm just a simple man trading a simple plan.

My daddy always said, "Every day above ground is a good day!"
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 DonStar 
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Thanks guys. The good news is that I still don't know any big words.

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 DonStar 
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Here is a chart of the 1st of 4 pipetop formations identified this week.

The red horizontal line is the trigger line.

Since HURC closed below the trigger line this stock is a sell on the open Monday.

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 kbit 
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Nice to see you again Don, This is a pipe top or whatever it's called on the top side of a 2000 tick TF chart today

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 DonStar 
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Thanks Kbit. It's good to be back.

Yes, that is a very nice one!

I am noticing that it looks like when the 2nd pipe is in the direction you want to go (like you have a red candle on a pipe top) the results seem to be better.

Did you trade it?

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 DonStar 
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Here is the chart for the 2nd stock identified this week as a pipe top.

Because it confirmed, the trade would have been entered at today's open.

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 kbit 
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Thanks Kbit. It's good to be back.

Yes, that is a very nice one!

I am noticing that it looks like when the 2nd pipe is in the direction you want to go (like you have a red candle on a pipe top) the results seem to be better.

Did you trade it?

Yes I traded it ....I have some other stuff that gave me a entry at about the half way back area of the pipe.

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 DonStar 
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FYI.

I wanted to put on all four pipetop trades today but had techinical difficulties.

I hope to put them on at tomorrow's open.

They will be late by a day, but since I am using weekly signals it shouldn't make or brake the system's results.

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 DonStar 
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Here is the same pipebottom trade on the S&P 500 I posted on Feb 19th (only updated to today).

Still a winning trade, but wavering.

Don

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  #54 (permalink)
 madLyfe 
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just saw some pipe tops maybe on the ES 5min.. well see how they turn out if they close below the pipe.. (just noticed, yay 900 posts! )


dont believe anything you hear and only half of what you see

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 madLyfe 
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just saw some pipe tops maybe on the ES 5min.. well see how they turn out if they close below the pipe.. (just noticed, yay 900 posts! )


feels odd to quote oneself.. anyways, here is the close below the pipe.. lets see how she turns out:


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 madLyfe 
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feels odd to quote oneself.. anyways, here is the close below the pipe.. lets see how she turns out:


and here is the final product of the pipe top:


dont believe anything you hear and only half of what you see

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 Fat Tails 
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Just a few words on pipe bottoms, pipe tops and reversal bars.

The pipe top or bottom, also called railway, is basically a reversal bar that extends over 2 bars. A railway on 5 minute chart is a reversal on 10 minute chart. For that reason I try to identify both

-> the smaller timeframe reversal bars
-> the larger timeframe railways

Further I think that reversal bars should be filtered. I use two indicators for filtering, a range indicator and the VWAP with standard deviation bands. The filtering by the range indicator is automated, the VWAP filter is currently added manually, will probably change that.

Just commenting the 11 candles, which I have marked on the chart:

1) weak reversal and part of a descending triangle failure

2) failed reversal wihtin a strong downtrend

Both reversals can be discussed, maybe they are not valid as the 10 minute close is below the open.

3) reversal bar detected on both timeframes (5 min and 10 min), validated by support and the VWAP 2SD band.

4) reversal bar detected on the higher timeframe, validated by both indicators.

5) far away from 2SD band - ignore.

6) far away from 2SD band - ignore

7) close enough to 2SD band, completes a 3-push-pattern.

8) valid pattern

9) too far away from 2SD band - ignore

10) valid pattern

11) valid pattern

Still working to improve the concept. I look at a volume indicator and an oscillator as well. For a reversal there should be a divergence somewhere on the chart.


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 DonStar 
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Good job on the trade MadLyfe and thanks for your comments FatTails.

Here is a chart of OXM which also qualified as a pipetop this week and confirmed by closing below the trigger line.

Short on this trade at the Tuesday market open.

Don

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 madLyfe 
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Good job on the trade MadLyfe and thanks for your comments FatTails.

Here is a chart of OXM which also qualified as a pipetop this week and confirmed by closing below the trigger line.

Short on this trade at the Tuesday market open.

Don

thats a pipe? i thought they had to have almost the same highs or lows? cuz if you look across charts you can see where there are many that would be huge failures.. ill post in reply with one on a previous chart that always bugged me..

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 madLyfe 
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thats a pipe? i thought they had to have almost the same highs or lows? cuz if you look across charts you can see where there are many that would be huge failures.. ill post in reply with one on a previous chart that always bugged me..

here are some examples of what i was talking about:


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 DonStar 
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According to Mr. Bulkowski these are pipes. That is why I started this thread with the hope of making some sense of it all. The one on the S&P500 I came up with. I did not try to go back--just called it from the time I saw it.

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 DonStar 
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Here is a chart of the last of the four pipetops identified this week (POL).

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 madLyfe 
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i know weve talked about this before, but why not enter at the close of the day where you know the days bar is going to close correctly for an entry? i feel like you would be giving up any type of gap or whatever when you enter on the open of the bar after the confirming bar..

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 DonStar 
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I agree with you madLyfe that this would be a better way to trade the pattern. The problem is that I am not in a position to do so. My job keeps me away from being able to monitor the market.

I am working on a way to identify the pipe pattern over the weekend (from the past two weeks) and if I have the weekly set up then using the daily timeframe to trigger the trade.

When I have the ability to monitor the market like I want to then I will be able to monitor/trade the shorter timeframes.

Don

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 DonStar 
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Four pipetops sold short on April 17, 2012. Three are losing positions so far and one is winning.

Bought S&P 500 on December 26, 2011. Currently sitting on 11.36% Gain.

With all five positions considered, the Pipes portfolio has a 10.18% gain.

Charts and portfolio attached below.

Don

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 kbit 
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DonStar View Post
Four pipetops sold short on April 17, 2012. Three are losing positions so far and one is winning.

Bought S&P 500 on December 26, 2011. Currently sitting on 11.36% Gain.

With all five positions considered, the Pipes portfolio has a 10.18% gain.

Charts and portfolio attached below.

Don

I'm glad your making out overall... some of those that are backing up on you looked kind of like weak setups to me.
Mainly the size of the formations (pipes) would tend to scare me away.

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 DonStar 
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Thanks kbit!

Great point. I started this thread with the hope that I could work out a system to make pipes more profitable.

How would you define a "strong" setup as opposed to a "weak" setup?

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 DonStar 
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Two stocks were identified to have pipe bottom formations this week.

DNDN
BBH

Both have confirmed buy signals by closing abobe the trigger line (the highest high of the two pipes).

Buy at market orders will be placed for Monday's open.

Don

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 kbit 
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Thanks kbit!

Great point. I started this thread with the hope that I could work out a system to make pipes more profitable.

How would you define a "strong" setup as opposed to a "weak" setup?

Well I guess if the pipes were at least the same size or larger than the previous candles it would be stronger in my view....the ones you have selected seem a bit on the small size to me.

In addition to that is location, though I suppose it's not that critical here but as you are aware no doubt the ones that occur at the very bottom of the larger swings are probably the best. I only mention it just for the record.

Like I said in the beginning of your thread I am not an expert on pipe bottoms, I'm just basing this on my general experience.

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 kbit 
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Two stocks were identified to have pipe bottom formations this week.

DNDN
BBH

Both have confirmed buy signals by closing abobe the trigger line (the highest high of the two pipes).

Buy at market orders will be placed for Monday's open.

Don

These two look good if for no other reason that they are engulfing bars ....and the second seems "good sized".

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 DonStar 
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Stopped out of SPX at close of week, Friday, 13 April 2012.

Closed position on Monday, 16 April 2012.

Trade ROI: 8.73% Gain

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 madLyfe 
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Stopped out of SPX at close of week, Friday, 13 April 2012.

Closed position on Monday, 16 April 2012.

Trade ROI: 8.73% Gain

you could keep your entry like you are right now and maybe use a little VSA for your exits..

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 DonStar 
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Thanks madLyfe. Food for thought. Right now I am stopping-out if prices closes above the previous high (if short) or the previous low (if long).

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 DonStar 
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Five open Pipe trades:

BBH
DNDN
HURC
NVDA
POL

Two Long and Three Short

Charts and portfolio update attached.

No new Pipe formations on the Bulkowski site this week.

I am attempting a scan of my own, I'll let you know if it yeilds results.

Don

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 Itchymoku 
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This use to actually be my premium long setup - 45 degree double dip pennant (although there was a lower low) - I use to trade only pennants or breakouts with 1:2 rr




here's another one i might have traded



sorry to digress, I just couldn't help but notice

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 DonStar 
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Thank you Itchymoku. These patterns seem to have several different names.

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