Yard Charts

The Bottom End Sweep is a bullish reversal pattern identified by YardCharts, resembling a right-angled triangle:

• Horizontal Line (Long side): Connects two or more roughly equivalent market highs. (Line 1, Picture A);
• Vertical Line (Short side): Extends from the horizontal to the lowest point below it. (Line 2, Picture A);
• Hypotenuse: Connects descending market lows, reflecting bounces below the horizontal. (Line 3, Picture A).

• Requires at least two, ideally three, bounces with descending lows under the horizontal line. (Picture B)
• Preferably, the down-move should have more or equal bars than the up-move, indicating slower descent than ascent.
• The formation of a Bottom End Sweep is confirmed when the market has performed at least 2 bounces under the horizontal and satisfies the following two conditions:
  • As soon as the market breaks the horizontal from below, the market rises up to a minimum distance (50% of the short side) above the horizontal, peak 1 in picture B.
  • As soon as the level above the horizontal, peak 1 has been touched, the market retraces back within a close range to the horizontal. This retracement represents the entrypoint. picture B.
  • A stop loss is advisable within a certain percentage point below the blue line, depending on how deep is the triangle and the trader's risk appetite. In any case, if the market falls back below the last bounce low, a stop loss is paramount as this means the market has failed the pattern.

Here are 3 instances YardCharts has identified in Nasdaq and NYSE where this pattern led to significant gains postentry, with the market rising to at least twice the length of the vertical side without triggering a 10% stop loss below the entry point.