Larry Pesavento, a trading veteran of over 40 years, and Leslie Jouflas explain the AB=CD pattern and how we can use it
History of the AB=CD Pattern
In 1935 a book was published for sale to investors at an incredible price of $1500. That book was Profits in the Stock Market by H.M. Gartley. On page 249 Gartley describes a chart pattern, “Practical Use of Trend Lines”, which we now call the AB=CD Pattern.
Gartley’s description of the AB=CD pattern illustrated how the market would rally in an uptrend and then retrace. It would then rally to another uptrend then make another retracement forming an upsloping parallel channel. It was from this description that the AB=CD pattern achieved its nickname as the “Lightning Bolt”.
Gartley spent several pages referring to these trend lines and parallel lines as excellent signals when used in conjunction with other working tools. He also applied these lines to price ratios.He used mainly ratios of one third and half retracements.
Read the rest of this entry »
Swing trading is profitable only when there are oscillations and good volatility. However, this volatility is quite cyclical in nature; the market experiences a constant ebb and flow of range contraction /range expansion. Toby Crabel elaborates on this principle in his book, Day Trading with Short-Term Price Patterns and Opening Range Breakout. He states that after the market has had a period of rest or range contraction, a trend day will often follow.
Read the rest of this entry »
Identifying chart patterns is simply a system for predicting stock market trends and turns!
Hundreds of years of price charts have shown that prices tend to move in trends. (I’m sure we’ve all heard the saying, ‘the trend is your friend’.) Well, a trend is merely an indicator of an imbalance in the supply and demand. These changes can usually be seen by market action through changes in price. These price changes often form meaningful chart patterns that can act as signals in trying to determine possible future trend developments.
Research has proven that some patterns have high forecasting probabilities. These patterns include: The Cup & Handle, Flat Base, Ascending and Descending Triangles, Parabolic Curves, Symmetrical Triangles, Wedges, Flags and Pennants, Channels and the Head and Shoulders Patterns. In my opinion, these are some of the best patterns to trade.
This section is designed to introduce you to some of these chart patterns, as well as teach you to identify repetitions in the market qualities, to make timely and more accurate decisions when predicting market trends.
Read the rest of this entry »
This overview covers a very basic, but powerful reversal trading pattern. There are two versions of the pattern. The primary pattern is called a Gartley. The second pattern is a variation of the Gartley and is called a Butterfly. The Gartley pattern is named after H. M. Gartley who wrote a book in 1935 called “Profits in the Stock Market”. Pages 200-250 of his book display a library of patterns that cover all the patterns in the market ever discussed. You may have heard the phrase “Gartley 222” when referring to this pattern because the pattern is found on page 222 of H. M. Gartley’s book.
Read the rest of this entry »
Category 1
Only trade in the direction of the trend (Trend is determined by a rising or falling Point Of Control/POC)
Trade setup #1a: In a down trending market, when the current session opens below the previous day’s Value Area/VA enter a short trade at the previous day’s lower VA and again at the previous day’s POC/HVL placing a protective stop for both trades 1.5 points above the previous day’s upper VA.
Trade setup #1b: In an up trending market, when the current session opens above the previous day’s VA enter a long trade at the previous day’s upper VA and again at the previous day’s POC/HVL placing a protective stop for both trades 1.5 points below the previous day’s lower VA
Read the rest of this entry »
The Gimmee bar comes from one of the oldest formations known to traders, the reversal bar at the end of rising or falling prices when a market is seen overall to be going sideways. Although the recognition of reversal bars is ancient, using them in combination with Bollinger Bands is not ancient. Until the advent of computers, it was much too difficult and time consuming to calculate the bands. Virtually all software worth anything these days can put the bands on a chart for you, so we’ll not waste time here with the mathematics. Suffice it to say that the bands are so constructed that when set with a 20 bar moving average of the close at two standard deviations, approximately 96.5% of all closes will be contained within the bands. Here’s how the bands look. How to trade the Gimmees will follow:
GIMMEE BARS ARE NOTHING MORE THAN REVERSAL BARS THAT TAKE PLACE ONCE PRICES HAVE REACHED THE UPPER OR LOWER BANDS IN A SIDEWAYS MOVING MARKET.
Read the rest of this entry »