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Diving Board Pattern

Diving Board Chart Pattern

The diving board pattern has three parts on the weekly chart: the "diving board", a horizontal price consolidation with a flat bottom (i.e. support line) that lasts on average about 24 weeks; the "plunge", which is a dramatic drop below the support line that occurs over more than a week and is on average a 26% decline; and finally the "recovery" which is a move back upward that reaches the diving board price area 63% of the time (Bulkowski, 2010).

Diving Board Average TimeSpans and Price Moves

diving board is 0 to 6 months, average plunge 26%, retrace rise 39%

Suggested Buy Signal

The buy signal is given two weeks after the lowest low for the plunge is recorded. The lowest low means that the price bar before and the price bar after it have higher lows and usually higher highs. Once the weekly price bar after the lowest low has completed its price action for the week and has maintained higher lows, then the following week, a trader buys at the open. Since 64% of the plunges retrace backward to the price area of the diving board, selling out at the diving board price is an option, though Bulkowski (2010) suggests traders "hold onto the trade as long as the upward trend continues."

Diving Board Chart Example

Stock chart of Intel with a diving board price pattern

The weekly chart above of Intel (INTC) illustrates a diving board reversal. Prices consolidate at an area of support for 21 weeks, and then a large weekly price bar drops, followed by the next week’s price bar that makes a new low. The following week establishes a higher low with a higher close which means the week prior has been established as the low. Using the rules for the pattern, a trader would buy at the opening of the new week after the previous week that established a higher low.

Works Referenced

  1. Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
  2. Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
  3. Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
  4. Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
  5. ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.
  6. The Pattern Site. (2005). Bulkowski's Diving Board . Retrieved June 1, 2012, from http://thepatternsite.com/DivingBoard.html