This week's pattern was drawn from Nokia (NYSE:NOK). It featured four bearish days followed by a bullish day.
What was unusual about this pattern was the poor short term performance, offset by a stronger long term performance.
|Match||No. of Patterns ||1-day |
|Average Return |
Per Trade (> 5 day)
Given the coin-toss probabilities over the 5-day outlook, bar the 67% probability for a lower close on the fifth day on the Strong Match, it's not a pattern to generate short term interest.
However, when the Average Return Per Trade was considered (Average Return Per Trade assumes an initial stop of 10%, raised to 5% off the price reached on a 15% gain. Ultimate Profit Target of 25%) the performance of the pattern improved. The win percentage of the pattern when applied with the aforementioned risk strategy, ranged from 58% at the Strongest match to 65% at the Neutral match. The latter match also having the Average Return Per Trade.
Using the Neutral match and running a market scan returned 61 matches. One such match was for Marshall and Ilsley (NYSE:MI).
With the stock trading above its 50-day MA and 200-day MA (and the 50-day MA riding above its 200-day MA) there is good reason for Marshall and Ilsley to be one of the 65% to close in profit (and if it is, the average return from winning trades is 13.4%).