Stop: A Stop is placed few ticks below C (in Bullish) or few ticks above C (in Bearish) levels. Targets: The ABC Pattern targets are computed using the AB and BC swings. The height pattern (AB) is used to project target levels from C-level using fib. ratios. The first target zone is (62-79% AB) from 'C' and second target zone is (127-162% AB). A secondary target level is set at 100% AB Level at 152.21. Key Ideas to Remember: The Fibonacci relationships help and give ideas an approximate area (PCZ) where the pattern may complete. Precise ratio levels for reversals or targets in patterns are very rare and a tolerance ratio of +/- 2% is added for the fib. ratios. Pattern confluences with other patterns, support/resistance areas, MAs and other market context elements must be used to identify and validate the pattern structure. Example: The following example shows the auto-generated ABC Bearish pattern in current Live Cattle futures (LC) daily chart. After a steep rise in LC futures from February to May of 2017, prices may have formed a top as it builds an ABC Bearish pattern. Here are few key points on how it is traded. ● LC was in a steep uptrend from Feb. '17 to May '17. ● In May 2017, LC formed its first leg (AB) as the prices declined (in 8-sessions) from 130.800 to 116.825. ● From mid-May to June, LC attempted to rally back and formed its second leg (BC) from 116.825 to 127.650. ● In June 1st week, prices reversed again from "C" as LC prices started to fall in the same direction as AB leg. ● "C" pivot retracement of 77.46% completes ABC Bearish pattern. ● A Short-entry was triggered as price closed below Entry 123.725 with a Stop 127.65. ● The first target range is set at 116.60-119.025 and second target range is set at 105 to 109.9 (127%162%).
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