|
|
|
|
Written by and copyright © 2005-2008 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.
|
|
|
|
|
|
|
|
|
|
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) 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
|
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
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 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.
|
|
. At no cost to you, they pay for the referral and that helps support this site. 
