ABC Patterns

The basic "ABC" pattern is first described in H.M. Gartley's book, Profits in the Stock Market (1935). This pattern is shaped like a lightning bolt and signals a trend, a retracement and the resumption of the trend. This pattern is also called the "ABC Wave" or 1-2-3 pattern by technical analysts.

The "ABC" patterns forecast key market turning points and profit targets for traders. "ABC" patterns pinpoint important pivot levels with high and low prices and identify key trading zones.

The key point in identifying a "ABC" is correctly finding the A, B, and C pivot points in a chart. These key pivots are found using for various "pivot strength" levels, and for its correction waves. Once A, B, and C pivots are identified, an Auto-levels algorithm is applied to determine the confluence level "D". This area is called "Potential Reversal Zone" (PRZ).

The "C" pivot in "ABC" patterns are determined by the Fibonacci retracement of (38.2 to 61.8 percent) of AB swing. The projection from "C" level is measured using fib-ratios of AB and BC swings. Some traders use the confluence of these ratio levels as areas for profit taking.

ABC Bullish Pattern

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