As of 05/23/2024
Indus: 39,065 605.78 1.5%
Trans: 15,009 185.73 1.2%
Utils: 924 20.84 2.2%
Nasdaq: 16,736 65.51 0.4%
S&P 500: 5,268 39.17 0.7%

YTD
+3.7%
5.6%
+4.8%
+11.5%
+10.4%

41,000 or 38,500 by 06/01/2024
16,050 or 15,300 by 06/01/2024
960 or 900 by 06/01/2024
17,250 or 15,850 by 06/01/2024
5,500 or 5,100 by 06/01/2024

As of 05/23/2024
Indus: 39,065 605.78 1.5%
Trans: 15,009 185.73 1.2%
Utils: 924 20.84 2.2%
Nasdaq: 16,736 65.51 0.4%
S&P 500: 5,268 39.17 0.7%

YTD
+3.7%
5.6%
+4.8%
+11.5%
+10.4%
 
41,000 or 38,500 by 06/01/2024
16,050 or 15,300 by 06/01/2024
960 or 900 by 06/01/2024
17,250 or 15,850 by 06/01/2024
5,500 or 5,100 by 06/01/2024
 
Initial release: 6/22/2018. Statistics updated 8/28/2020.
This article describes my analysis of the bullish AB=CD pattern as described by publicly available information and common sense rules to determine valid patterns. Additional rules may or may not improve performance. I tested the pattern using only the below identification guidelines.
The idea about this pattern is once you know the first three points, you can calculate the fourth. Price reaches or exceeds the calculated point D 100% of the time. However, the stock is supposed to turn upward at D and that only happens 38% of the time.
The bullish AB=CD is a measured move down chart pattern except that the turns are located using Fibonacci ratios.
Bullish AB=CD

The above numbers are based on at least 1,741 perfect trades. See the glossary for definitions.
* As measured from the valley at point D.
Find four turns where the ratio of one leg to another is close to the Fibonacci numbers listed in the prior table. What does "close" mean? In my tests, I used 1% because this pattern occurs so frequently, a larger percentage is not necessary. See Trading Tips for an explanation of this. I used a reciprocal of the Fibonacci retrace to predict D. That excluded some of the ratios listed in the table, BCD row, because they are not reciprocals of the ABC retrace (meaning I excluded 314% and 224%). 
Bullish AB=CD Ratios

After reaching point D and turning upward, price rises to A 40% of the time, to B 83% of the time, and to the price of C 47% of the time. You can use those as targets.
The following explains how to use the measure rule to predict point D. Why is this important? Because if you can identify a valid ABC turn, you can determine how far price will drop (to D).
Find the ABC retrace which obeys one of the Fibonacci ratios listed in the previous table. Because the CD leg is supposed to equal the length of the AB leg, if we know the length of AB, we can compute point D.
For example, if point A is at 35, B is at 25 and C is at 28.82. Point C retraces 38.2% of the AB move. The length of AB is 10. Subtract this from the high at C gives a target of 18.82.
In this case, the CB leg is 10.9810 or 0.98. Multiplying this by 2 gives 1.96 and subtracting 1.96 from the high at C gives 9.02. That value becomes the D target.
You can increase the accuracy of the measure rule by using the next higher Fibonacci number in the formula to find point D.
In this example, instead of using 50%, use 61.8%. The multiplication number would change from 2 (1/0.5) to 1.618 (1/0.618). So we have 0.98 * 1.618 or 1.59. Subtract that value from the high at C (10.98) gives 9.39, closer than the prior method's 9.02.
The above chart shows a bullish AB=CD pattern on the daily scale.
Price peaks at A at 49.82, drops to B at 45.37 and retraces to C at 49.29. The ABC retrace measures (49.2945.37)/(49.8245.37) or 88%, close to the 88.6% retrace from the Identification Guidelines table.
D has a low of 43.40, although the next day price makes a lower low.
Does D reach the predicted measure rule target? Let's find out.
The AB drop is 49.8245.37 or 4.45. Subtracting this from C gives 44.84. So, D is below the target. In other words, the ABC move correctly predicted point D.
Although the stock made a lower low the next day, it has moved higher, reluctantly it seems, to a high of 52.43 on May 1, 2018 before moving lower again.
 Thomas Bulkowski
AB=CD is a registered trademark of Scott Carney.
Support this site! Clicking any of the books (below) takes you to
Amazon.com If you buy ANYTHING while there, they pay for the referral.
Legal notice for paid links: "As an Amazon Associate I earn from qualifying purchases."
My Stock Market Books

My Novels

It's not hard to meet expenses, they're everywhere.