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%  
  Targets    Overview: 05/13/2024  
  Up arrow41,000 or 38,500 by 06/01/2024
  Up arrow16,050 or 15,300 by 06/01/2024
  Up arrow960 or 900 by 06/01/2024
  Up arrow17,250 or 15,850 by 06/01/2024
  Up arrow5,500 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%  
  Targets    Overview: 05/13/2024  
  Up arrow41,000 or 38,500 by 06/01/2024
  Up arrow16,050 or 15,300 by 06/01/2024
  Up arrow960 or 900 by 06/01/2024
  Up arrow17,250 or 15,850 by 06/01/2024
  Up arrow5,500 or 5,100 by 06/01/2024

Bulkowski on the Simple ABC Correction

The simple ABC correction is a measured move down chart pattern nested inside a measured move up. If measured moves are unfamiliar, then click the associated link for more information. My book, Encyclopedia of Chart PatternsEncyclopedia of Chart Patterns 2nd Edition book., pictured on the left, has a complete discussion of measured moves.

If you click on the above link and then buy the book (or anything) while at Amazon.com, the referral will help support this site. Thanks.

-- Tom Bulkowski

$ $ $

Shows a Simple ABC correction

A Simple ABC Correction

Simple ABC Correction: Identification Guidelines

CharacteristicDiscussion
NestedThe simple ABC correction is a measured move down chart pattern nested inside a measured move up.
ChartSee the above chart. Point D must be below point C, meaning that the measured move down (MMD: EABC) must not correct too far. MMDs that correct too far fail more often.
Corrective phaseThe corrective phase of the large MMU is an MMD, like the ABC pattern shown in the above chart. Only one MMD should be present with two straight-line runs, EA and BC. Discard patterns with pronounced turning points within those two down legs.
PointsWithin the MMD, points A, B, and C are below E. Be especially careful that B not be above E. Point C starts a major price up swing.
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Simple ABC Correction: Trading Tips

Reference the figure on the right.

Trading TacticExplanation Shows a Simple ABC correction
TrendlineDraw a trendline from E to B and extend it downward. When price closes above the trendline, buy.
SwingersFor aggressive traders, draw a trendline down from B along the tops and buy when price closes above it. A close above the intraday high at A (blue trendline) also works as a buy signal.
BuyFor conservative investors, a close above B or even E is the buy signal.
ReverseBe prepared for price to reverse at the price of E -- 36% do and prices drop, confirming a double top.

 

Simple ABC Correction: Example

Simple ABC correction chart pattern example

The above figure shows an example of a simple ABC correction chart pattern. Point A begins the chart pattern, B is the middle turning point, and C completes the pattern. Another simple ABC correction occurs at points 1, 2 and 3.

-- Thomas Bulkowski

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See Also

 

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