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Bulkowski’s Simple ABC Correction
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Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P 500 (^GSPC):
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As of 09/02/2010
10,320.10 50.63 0.5%
4,342.03 58.62 1.4%
396.87 -0.49 -0.1%
2,200.01 23.17 1.1%
1,090.10 9.81 0.9%
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YTD
-1.0%
5.9%
-0.3%
-3.0%
-2.2%
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 400 by 09/15/2010 |
CPI:  on 08/27/2010 |
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Written by and copyright © 2005-2010 by Thomas N. Bulkowski. All rights reserved.
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.
A Simple ABC Correction
Identification Guidelines
| Characteristic | Discussion |
| Nested | The simple ABC correction is a
measured move down chart pattern nested inside a
measured move up. |
| Chart | See 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 phase | The 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. |
| Points | Within 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. |
Trading Tips
Reference the figure on the right.
| Trading Tactic | Explanation |  |
| Trendline | Draw a trendline from E to B and extend it downward. When
price closes above the trendline, buy. |
| Swingers | For 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. |
| Buy | For conservative investors, a close above B or even E is
the buy signal. |
| Reverse | Be prepared for price to reverse at the price of E – 36% do and
prices drop, confirming a double top. |
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.
Other Examples
-- Thomas Bulkowski
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