The question came up yesterday about the technical formation
known as an "outside day."  An outside day occurs when one day’s
high is higher than the previous day’s high, and its low is
lower than the previous day’s low. This is often taken as a
signal that the market is about to make a move in the direction
of the close.  However, negative outside days are less than a
conclusive formation, according to the Encyclopedia of Chart
Formations (Bulkowski). The expected response to an outside day
with a downside breakout (like yesterday’s) — more selling — has
a 42% failure rate.  That’s rather inconclusive.  Bulkowski did
a study of 510 outside day formations in 51 stocks over 5 years.
He found the pattern, at least for individual names, was fairly
common. The stocks failed to move in the predicted pattern 4 out
of 10 instances. A pattern is considered a poor predictor if it
fails 2 out of 10 times. So the outside day with a downside
breakout turns out to be little better than a 50/50 predictor —
a toss of a coin