The possible AB=CD pattern was first mentioned in November of 2022. Read the full post here or see relevant part below:
The AB=CD Pattern
The AB=CD pattern is the simplest harmonic patterns. It is made up of three swings.
One in the direction in the trend. A retracement of the correction. A second move inline with the trend.
How the swings are labelled is a little weird if you know harmonics but much easier if you don’t. The only swings we label are the ones in line with the trend.
First swing is A - B. A is the low and B is the high (Or vice versa).
Second swing is C - D. C is the low and D is the high (Or vice versa).
The AB=CD is pattern is so called because the first swing and the second swing are equal in size and thus, AB=CD. Often just called the “ABCD pattern”.
A Massive ABCD Setup on SPX
The ABCD is a reversal pattern. It is not intended to be used to forecast the “CD” leg. What this pattern tells us is there’s increased chance of a reversal if D is met following the criteria of the pattern. My assumption we might be in a big ABCD forming is speculative, but if we are - we have a good idea of conditions to expect.
I do want to reiterate assuming harmonic patterns will form is a net losing strategy. We can create a roadmap for what may happen but need to use trend following strategies to support the overall bias. If this is a CD leg, the trend should be strong and simple trend strategies should work.
The great benefit of being aware of the possible ABCD is there’s massive upside to it if it is in play and also there’s small downside if it’s not because you can work that out very early. The characteristics of a CD leg are specific and we can make plans that will optimise gains if it works while knowing early when to get out at a cheap loss.
This would be the required swing for an ABCD pattern to form in SPX. Minimum of 6,000 (And can be overshoots).
Which would be quite the opportunity. Let’s now look deeper into whether or not there’s a good case for the ABCD being in play. What sort of conditions/moves we’d expect inside a CD leg. Optimal strategies and levels to watch. Areas for tight stops and trailing stops.
If we are in an AB=CD leg, CD will be at least as impressive as AB. The moves are not only similar in size they are similar in style.
I’d expect it to be stronger. In a harmonic, the CD leg is always the strongest part of the whole move.
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