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Simple ABC Correction
What should you look for when searching for measured moves?
Here’s a list
• Measured moves act as reversals of the prevailing price trend. For
MMUs, look for a downtrend before the chart pattern begins.
For measured move down , look for an uptrend preceding the pattern.
• The first leg should be a straight-line run with little curve to it.
• The corrective phase should be proportional to the first leg. Prices
usually retrace 40% to 60% of the first leg move. Be suspect of
larger retraces. Pair large first legs with large retraces; small first
legs with small retraces. Avoid patterns that look like horizontal
saw teeth—the retrace has gone too far.
• The second leg should approximate the slope of the first leg, but allow variation.
• Volume trends downward throughout the pattern.
Simple ABC
Correction trading Tips and
free forex signals
Draw a trendline from A to C and extend it downward. When
price closes above the trendline, buy.
• For more aggressive traders, draw a trendline down from C and
buy when price closes above it (see the dashed line in the figure).
Also, a close above the intraday high at valley B works.
• For more conservative investors, a close above C or even A is the
buy signal.
• Buy only if the market and industry are both trending upward, so
the stock can make the most of upward momentum.
• Be prepared for price to reverse at A—36% do, and prices drop,
confirming a double top.
The larger the corrective phase retrace, the better the chance of
meeting the price target
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