Chart patterns and candlestick setups
Does waiting for confirmation before buying help?
Rejected Pre-registered and tested, July 2026
Worse than the worst of ten random delays. For momentum entries the earliest price is the best price.
What the pattern claims
Not a chart pattern but an overlay on top of one, and the cheapest possible idea to test: it adds no extra trading. Instead of buying on the day a signal fires, wait up to four more days and buy on the first day MACD is rising. Same trades, same number of them, just better-timed entries.
How we tested it
Applied to the entries the live strategy already generates, so these were real candidate buys rather than a synthetic population.
Every study here was pre-registered: the exact rule, the pass and fail thresholds and the data window were written down and cryptographically fingerprinted before the test was run. That makes it impossible to move the goalposts after seeing the answer.
Results assume you buy at the next morning's open, not at the closing price that triggered the signal, and they include companies that were later delisted or went bust. Returns are measured against what the rest of the market did on the same days, so a rule that made money only because it fired on days everything rose scores zero here.
What happened
On 77% of buys there was nothing to wait for — MACD was already rising on the day the signal fired. That is close to definitional: the strategy admits momentum leaders, and rising MACD is very nearly what being a momentum leader means.
On the remaining 23%, where the rule actually delayed something, waiting cost 80 basis points. Across all entries the rule cost 18 basis points at 60 days.
The most useful comparison: we ran ten versions that delayed entries by a random number of days. The MACD rule was worse than the worst of them. Even random delay costs about 13 basis points, because momentum names drift upward while you wait.
What it means
For entries selected on strength, the earliest available price is the best available price. Any confirmation step is buying the same stock higher.
There is a subtler lesson about transferring findings. The MACD condition used here was not invented for this test — it was the one narrow survivor of the moving-average reclaim study, where it produced a real short-term bounce. But that study was about buying weakness: a stock that had pulled back. This one applies it to buying strength.
Same indicator, same timeframe, opposite setup, and the result reversed. A finding validated on dip entries does not transfer to momentum entries, and the fact that both involve 'buying' is not enough to carry it across.
A rejection is not "this never works"
It means: tested on this universe, over this period, against a bar written down in advance, it did not clear the bar. Where a test lacked the power to decide either way we record it as undecided rather than rejected. The full research ledger has all 192 experiments and what the failures have in common.
Other patterns we tested
- Does the bull flag pattern work? The pole is the only live part of the pattern. Every flag condition made the result worse.
- Does MACD divergence work? The loose version changed the outcome by less than one hundredth of a percent. The strict version widened both tails.
- Does breakout and retest work? The setups the rule throws away outperformed the ones it keeps.
- Does buying the dip after a spike work? The first pattern in this family to lose money significantly rather than merely do nothing.
- Does a big RSI drop mark a buying opportunity? The family's only statistically significant result, and it vanished completely once we accounted for when it fired.
- Do three shrinking red candles signal a bottom? The only chart pattern that beat all its own control groups — and it still could not clear the error bars.