Diving Board 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
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
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.
- Kirkpatrick II, C.D., & Dahlquist, J.R. (2010). Technical Analysis: The Complete Resource for Financial Market Technicians (2nd ed.). Upper Saddle River, NJ: FT Press.
- Rockefeller, B. (2011). Technical Analysis For Dummies (2nd ed.). Hoboken: John Wiley & Sons.
- The Pattern Site. (2008). Bulkowski's Measure Rule. Retrieved June 1, 2012, from http://thepatternsite.com/measure.html
- The Pattern Site. (2005). Bulkowski's Diving Board . Retrieved June 1, 2012, from http://thepatternsite.com/DivingBoard.html