As of 12/04/2020
Indus: 30,218 +248.74 +0.8%
Trans: 12,742 +155.26 +1.2%
Utils: 856 10.76 1.2%
Nasdaq: 12,464 +87.05 +0.7%
S&P 500: 3,699 +32.40 +0.9%

YTD
+5.9%
+16.9%
2.6%
+38.9%
+14.5%

30,700 or 28,250 by 12/15/2020
13,500 or 11,700 by 12/15/2020
830 or 925 by 12/15/2020
12,500 or 11,400 by 12/15/2020
3,750 or 3,400 by 12/15/2020

As of 12/04/2020
Indus: 30,218 +248.74 +0.8%
Trans: 12,742 +155.26 +1.2%
Utils: 856 10.76 1.2%
Nasdaq: 12,464 +87.05 +0.7%
S&P 500: 3,699 +32.40 +0.9%

YTD
+5.9%
+16.9%
2.6%
+38.9%
+14.5%
 
30,700 or 28,250 by 12/15/2020
13,500 or 11,700 by 12/15/2020
830 or 925 by 12/15/2020
12,500 or 11,400 by 12/15/2020
3,750 or 3,400 by 12/15/2020
 
Initial release: 6/20/2018. Stats updated 8/28/2020.
This article describes my analysis of the bearish AB=CD pattern as described by publicly available information and common sense rules to determine valid patterns. Additional rules may or may not improve performance. I tested the pattern using only the below identification guidelines.
The bearish AB=CD is a measured move up chart pattern except that the turns are located using Fibonacci ratios. The idea behind this pattern is that once you know the first three points, you can calculate point D. Price reaches point D 95% of the time in a bull market. However, the stock is supposed to turn down at D. It does, but only\ 32% of the time. In other words, price continues rising 68% of the time.
Bearish AB=CD

Important Bull Market ResultsOverall performance rank for down moves: 5 (worst) out of 5 (versus the other Fibonacci patterns only)
Break even failure rate: 26%
Average decline*: 13%
Percentage meeting predicted point D: 95%
The above numbers are based on 2,649 perfect trades. See the glossary for definitions. * As measured from the peak at point D 
Find four turns where the ratio of one leg to another is close to the Fibonacci numbers listed in the prior table. What does "close" mean? In my tests, I used 1% because this pattern occurs so frequently, a larger percentage is not necessary. See Trading Tips for an explanation of this. Testing used a reciprocal of the Fibonacci retrace to predict D. That excluded some of the ratios listed in the table, BCD row, because they are not reciprocals of the ABC retrace (meaning I excluded 314% and 224%). 
Bearish AB=CD Ratios

After reaching point D and turning downward, price drops to A 24% of the time, to B 76% of the time, and to the price of C 35% of the time. You can use those as targets.
The following explains how to use the measure rule to predict point D. Why is this important? Because if you can identify a valid ABC turn, you can determine how far price will rise (to D).
Find the ABC retrace which obeys one of the Fibonacci ratios listed in the previous table. Because the CD leg is supposed to equal the length of leg AB, if we know the length of AB, we can compute point D.
For example, if point A is at 25, B is at 35 and C is at 28.82. Point C retraces 61.8% of the AB move. The length of AB is 10. Add this to the low at C gives a target of 38.82.
In this case, the BC leg is 1210.98 or 1.02. Multiplying this by 2 gives 2.04 and adding it to the low at C gives 13.02. That value becomes the D target.
You can increase the accuracy of the measure rule by using the next higher Fibonacci number in the formula to find point D.
In this example, instead of using 50%, use 61.8%. The multiplication number would change from 2 (1/0.5) to 1.618 (1/0.618). So we have 1.02 * 1.618 or 1.65. Add that value to the low at C (10.98) gives 12.63, closer than the prior method's 13.02.
Consider a trade in AES corporation, the chart of which is shown on the right.
Point A has a low price of 10.23. B has a high of 11.32. And C has a low of 10.65. Does this qualify as a potential bearish AB=CD pattern?
Let's find out. The BC/BA retrace is (11.3210.65)/(11.3210.23) or 61.5%, which is close (within one percentage point) to the target ratio of 61.8%
So it's a valid pattern. What is the predicted price of D, which is to say, how far will price rise?
If the pattern works as it's supposed to, the stock will peak at 11.73. How do I know? Let's go through the calculation.
The reciprocal of the ABC retrace is 1/0.618 or 1.618. Multiply this by the BC leg and add it to the low at C. We get (11.3210.65)*1.618 + 10.65 = 11.73
A simpler approach is to compute the length of the AB leg and add it to the low at C. We have 11.3210.23 = 1.09. Add 1.09 to the low at C gives 1.09+10.65=11.74. The differences between the two methods are because of round off.
The stock closed at D at 11.74.
In this case, the stock reached the target but look what happened. Price kept rising. Oops. As I mentioned, my tests showed price continuing rising past D the vast majority of the time, and this is an example.
 Thomas Bulkowski
See Also

AB=CD is a registered trademark of Scott Carney.
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