As of 07/10/2020
Indus: 26,075 +369.21 +1.4%
Trans: 9,312 +172.05 +1.9%
Utils: 791 +17.12 +2.2%
Nasdaq: 10,617 +69.69 +0.7%
S&P 500: 3,185 +32.99 +1.0%

YTD
8.6%
14.6%
10.0%
+18.3%
1.4%

24,000 or 27,800 by 07/15/2020
8,400 or 10,000 by 07/15/2020
825 or 700 by 07/15/2020
10,800 or 10,000 by 08/01/2020
2,900 or 3,300 by 07/15/2020

As of 07/10/2020
Indus: 26,075 +369.21 +1.4%
Trans: 9,312 +172.05 +1.9%
Utils: 791 +17.12 +2.2%
Nasdaq: 10,617 +69.69 +0.7%
S&P 500: 3,185 +32.99 +1.0%

YTD
8.6%
14.6%
10.0%
+18.3%
1.4%
 
24,000 or 27,800 by 07/15/2020
8,400 or 10,000 by 07/15/2020
825 or 700 by 07/15/2020
10,800 or 10,000 by 08/01/2020
2,900 or 3,300 by 07/15/2020
 
Initial release: 6/22/2018. Statistics updated 4/2/20.
This article describes my analysis of the bullish 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 bullish AB=CD is a measured move down chart pattern except that the turns are located using Fibonacci ratios.
The pattern correctly predicts point D 37% of the time.
Bullish AB=CD

Important Bull Market ResultsOverall performance rank for up/down breakouts (1 is best): 30 out of 48/18 out of 46
Break even failure rate: *17%/24%
Average rise/decline: *41%/15%
Throwback/pullback rate: 64%/62%
Percentage meeting predicted price target (point D): 37%
The above numbers are based on at least 4,500 perfect trades. See the glossary for definitions. * As measured from the peak at point D, regardless of the breakout direction. 
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. I 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%). 
Bullish AB=CD Ratios

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 drop (to D). This method works 37% of the time, according to my tests.
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 the AB leg, if we know the length of AB, we can compute point D.
For example, if point A is at 35, B is at 25 and C is at 28.82. Point C retraces 38.2% of the AB move. The length of AB is 10. Subtract this from the high at C gives a target of 18.82.
This method works 57% of the time.
In this case, the CB leg is 10.9810 or 0.98. Multiplying this by 2 gives 1.96 and subtracting 1.96 from the high at C gives 9.02. 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 0.98 * 1.618 or 1.59. Subtract that value from the high at C (10.98) gives 9.39, closer than the prior method's 9.02.
The traditional measure I use to determine whether a chart patterns is bullish or bearish is to determine the breakout direction.
A close above the top of the pattern (above point A, refer to the image on the right) means an upward breakout. A close below the bottom of the pattern (below point D) means a downward breakout. Using this measure, I found that 56% of bullish AB=CD patterns breakout upward. That means the pattern is bullish.
An upward breakout occurs despite price ending the pattern at the low (D).
Also, the upward breakout after price has been stairstepping lower means this pattern acts as a reversal of the downward trend.
The above chart shows a bullish AB=CD pattern on the daily scale.
Price peaks at A at 49.82, drops to B at 45.37 and retraces to C at 49.29. The ABC retrace measures (49.2945.37)/(49.8245.37) or 88%, close to the 88.6% retrace from the Identification Guidelines table.
D has a low of 43.40, although the next day price makes a lower low.
Does D reach the predicted measure rule target? Let's find out.
The AB drop is 49.8245.37 or 4.45. Subtracting this from C gives 44.84. So, D is below the target. In other words, the ABC move correctly predicted point D.
Although the stock made a lower low the next day, it has moved higher, reluctantly it seems, to a high of 52.43 on May 1, 2018 before moving lower again.
 Thomas Bulkowski
See Also

AB=CD is a registered trademark of Scott Carney.
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