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Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Bulkowski's Simple ABC Correction

Class Elliott Wave Fundamentals Psychology Quiz Research Setups Software Tutorials More...
Busted
Patterns
Candles Chart
Patterns
Event
Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 07/31/2015
17,690 -56.12 -0.3%
8,392 -27.82 -0.3%
584 5.06 0.9%
5,128 -0.50 0.0%
2,104 -4.79 -0.2%
YTD
-0.7%
-8.2%
-5.5%
8.3%
2.2%
Tom's Targets    Overview: 07/27/2015
17,900 or 17,200 by 08/15/2015
8,700 or 8,000 by 08/15/2015
590 or 550 by 08/15/2015
5,200 or 4,850 by 08/15/2015
2,120 or 2,025 by 08/15/2015
Wilder RSI: -4.4%

Written by and copyright © 2005-2015 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You and you alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.

The simple ABC correction is a measured move down chart pattern nested inside a measured move up. If measured moves are unfamiliar, then click the associated link for more information. My book, Encyclopedia of Chart Patterns Second EditionEncyclopedia of Chart Patterns 2nd Edition book., pictured on the left, has a complete discussion of measured moves.

If you click on this link and then buy the book (or anything) at Amazon.com, the referral will help support this site. Thanks. -- Tom Bulkowski

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Shows a Simple ABC correction

A Simple ABC Correction

Simple ABC Correction Identification Guidelines

CharacteristicDiscussion
NestedThe simple ABC correction is a measured move down chart pattern nested inside a measured move up.
ChartSee the above chart. Point D must be below point C, meaning that the measured move down (MMD: EABC) must not correct too far. MMDs that correct too far fail more often.
Corrective phaseThe corrective phase of the large MMU is an MMD, like the ABC pattern shown in the above chart. Only one MMD should be present with two straight-line runs, EA and BC. Discard patterns with pronounced turning points within those two down legs.
PointsWithin the MMD, points A, B, and C are below E. Be especially careful that B not be above E. Point C starts a major price up swing.

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Simple ABC Correction Trading Tips

Reference the figure on the right.

Trading TacticExplanationShows a Simple ABC correction
TrendlineDraw a trendline from E to B and extend it downward. When price closes above the trendline, buy.
SwingersFor aggressive traders, draw a trendline down from B along the tops and buy when price closes above it. A close above the intraday high at A (blue trendline) also works as a buy signal.
BuyFor conservative investors, a close above B or even E is the buy signal.
ReverseBe prepared for price to reverse at the price of E – 36% do and prices drop, confirming a double top.

 

Simple ABC Correction Example

Simple ABC correction chart pattern example

The above figure shows an example of a simple ABC correction chart pattern. Point A begins the chart pattern, B is the middle turning point, and C completes the pattern. Another simple ABC correction occurs at points 1, 2 and 3.

-- Thomas Bulkowski

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Other Simple ABC Correction Examples

See Also

Written by and copyright © 2005-2015 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You and you alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. I'm in the prime of my strife.