2016issue C048-11
Evaluating breakouts by share-price band
In this archive evaluation, a completed breakout is graded first as a clean departure from the formation, then by the price-band where that departure prints. Chart-scale is treated as a separate input from pattern geometry.
- Grade the breakout first as a completed departure from the formation, using the close on the session before that departure as the reference print.
- Sort the same events into price-bands so chart-scale can be tested apart from the pattern shape.
- In this catalog, failure-rate at the 5 percent and 10 percent hurdles rose as the pre-breakout close moved from near $5 toward $80.
- Those failure-rate figures assume an idealized path from the reference close to the ultimate-high, not a live fill and exit.
Grade the departure, then the scale
A completed chart-pattern breakout can be graded twice. The first grade asks whether price has left the formation. The second grade asks which price-band that departure printed in.
Chart-scale is the share-price level at which the same pattern geometry prints. It is treated here as a separate input from the shape itself.
TradersWeek editorial reading: the second grade is what makes scale a falsifiable filter rather than a cosmetic detail of the chart.
Lore, floors, and the working hypothesis
Market lore often treats very low share prices as unattractive to large funds. Informal floors near $5 or $15 appear in that lore, even though no single statute was found that bars such purchases.
The working hypothesis was that finishing a purchase before large funds arrive could later coincide with incremental demand after a chart-pattern breakout.
The catalog and the measured move
The evaluation used 1,269 listed names, 38 chart-pattern types, and 22,940 pattern events dated May 1988 through June 2015.
Each event was measured from the close on the session before the breakout to the ultimate-high.
Split-unadjusted prices and the price-band sort
Prices were kept as a split-unadjusted-series so a later split would not recast a higher-priced name as a cheap-stock event. Dividends, commissions, fees, and names that stopped trading were also left unadjusted.
The same breakout catalog was sorted by the prior close into price-bands. Any bin under 30 events was flagged as unstable. The published charts mixed bull and bear regimes after those cuts looked similar.
Failure-rate across the scale
Failure-rate is the share of breakout events that never reach a 5 percent or 10 percent advance from the reference close.
Failure to advance at least 5 percent after the breakout rose from 2 percent of events near $5 to 17 percent near $80. Failure to advance at least 10 percent rose from 10 percent to 36 percent across the same scale.
A working purchase band
After weighing default risk below $1, the stated working purchase band was $5 to $20. That band was left open to revision once the price-band sort was in view.
TradersWeek editorial reading: keep the two grades in order. Confirm the breakout as a completed departure, then ask whether the price-band of that print changes how much weight the same geometry should carry. The $5 to $20 band is a historical working range from this workflow, not a purchase rule. That sequence is an editorial habit for reading this archive, not a claim in the archive workflow itself.
All readings on this track · 14 readings
- 1982Constructing semi-log scales for trend channels
- 1988Treat a suspected bend as a construction test
- 1989Constructing percentage-box point-and-figure charts
- 1989Constructing point-and-figure objectives across chart scales
- 1991Unfinished point-and-figure until filter, scale, and pivots measure percent
- 1992A logarithmic point-and-figure construction with weekly breadth scores
- 1995Constructing a least-squares trend channel with two-standard-deviation rails
- 1995Percentage boxes turn a three-box reversal into a scale decision
- 2003Log scale trendlines and compound growth
- 2007Trendline and channel construction on linear versus log scales
- 2012Constructing trend-intensity overlays across chart scales
- 2015Index drawdown caps, chart-scale stops, and leverage
- 2016Evaluating breakouts by share-price band
- 2016Constructing chart scale with a golden-rectangle aspect ratio