Thursday, January 10, 2013

The ABC pattern

Understanding the ABC pattern using, Bank of America Corp  (BAC) ;
1) After a long downtrend, price zooms up on huge volume, then as key news comes out, profit is
taken (we called the high "A")
2) We then wait for price to find a real key support ; price has to be way higher than its previous low, then form a regular higher low (we call this level "B")
3) Note that you are NOT a buyer yet !
4) See that trigger ? Price breaks out above "A", we now have our real key entry level called "C".
5) The level "C" can also be used as your stop loss.

Now what ? Expect price to enter a channel level, above "C", wait a few days for price to form a higher low, then start buying

Do not try to see ABC patterns everywhere ...
Look for those three key ingredients ;
Wide price moves
Key news

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