Doing Homework

For those that are interested in doing a deeper study of candle patterns, here is a site that I use often when I am reviewing charts: The Pattern Site. The following is an example of an Advance Block 3 candle pattern:

Important Results

 The ideal advance block candlestick

Theoretical performance: Bearish reversal
Tested performance: Bullish continuation 64% of the time
Frequency rank: 65
Overall performance rank: 54
Best percentage meeting price target: 53% (bull market, up breakout)
Best average move in 10 days: -4.76% (bear market, down breakout)
Best 10-day performance rank: 32 (bull market, down breakout)

All ranks are out of 103 candlestick patterns with the top performer ranking 1. “Best” means the highest rated of the four combinations of bull/bear market, up/down breakouts.

 

Advance Block

Discussion

 As I mentioned in the introduction, the advance block is supposed to act as a bearish reversal, but doesn’t. In fact, it acts as a bullish continuation pattern 64% of the time. The overall performance rank is 54, which is mid list out of 103 candles.

The best move 10 days after the breakout is an average drop of 4.76% in a bear market. I consider moves of 6% or higher to be good, so this one falls well short of that. However, the best performance rank is 32, which is respectable. You will find that the best performance comes from advance block candles with downward breakouts.

As you can from the above example, there is a great deal of valuable information provided – including data on the performance of the candle pattern.

In conjunction with this, you have the ability to select various candle patterns when doing a stock scan on Finviz. I do this frequently when I am looking for specific candle patterns, or if I just want to see what the scan will produce.

Leave a Reply

Your email address will not be published.