AB=CD, Wolfe and CCI combined trading


posted by Gautama on Wed Sep 18, 2013 06:55 pm

#1

price chart - daily

woodies cci - 20 (wcci), 9 (tcci) and 7 (ncci)

brief overview of ab=cd pattern structure

the ab=cd pattern is found in all markets and on all time frames. the pattern is a measured move where the second leg is “equal” to the first leg. it should be noted that the c-d leg can extend and will not always be exactly “equal.”

there are three legs that form this pattern. the first leg of the pattern is labeled a-b. after the completion of the first leg, retracement or correction will occur that will usually find support or resistance at one of these fibonacci levels; .382, .50, .618 or .786. this correction or retracement is labeled bc and is the second leg of the pattern. (note: strongly trending markets will usually see only a retracement to the .382.)

once price resumes in the same direction of the a-b leg the c-d leg then begins to form. once we identify the cd leg forming we can project the potential pattern completion and form a trading strategy. as the cd leg forms and completes we will monitor the final leg for any warning signs that would alert us to a change in market conditions that may signal us to possibly pass on the trade or wait for further confirmation before entering the trade. warning signs would include:

• wide range bars

• gaps near completion in the cd leg

• tail closes in opposite direction of trade

when studying this pattern it is important to know what invalidates the pattern. here are three items that would invalidate the ab=cd pattern:

1. c cannot exceed a. meaning the retracement of ab cannot exceed 1.00

2. c can be a 1.00 retracement of the ab leg, this is a rare pattern and a double top or bottom, but it is a valid pattern.

3. d must exceed b in order for the pattern to complete at d and be a valid ab=cd.

important characteristics of the ab=cd pattern

the ab=cd pattern will be perfectly symmetrical, meaning ab equals cd about 40% of the time. the other 60% of the time variations of the pattern will be present. what this means is that after the ab leg is formed and the retracement leg, bc, has completed, the cd leg will be entirely different than the ab leg. the two legs may or may not be perfectly symmetrical.

some of the ways the cd leg can vary from the ab leg are:

• cd leg is an extension of ab of anywhere from 1.27 to 2.00 or greater.

• cd leg has a slope or angle steeper or wider than ab

at first glance this would make the trader think the pattern is not tradable. the key lies in identifying the bc leg. the most important thing is to watch the price action coming after point c has formed. the c leg determines the relationship to the ab leg.

variations

these c leg phenomena can be described in 3 ways:

• first; if after point c has occurred and a gap exists in the direction of point d, this will usually indicate that the cd leg will be much greater than the ab leg. it indicates a 1.27 or 1.618 of ab).

• second; a wide range bar (twice normal size) at point c is also another indication that the cd leg is going to be extended.

• third; ideally ab=cd moves are symmetrical in price and time. for example; if the ab leg is 6 bars up then the cd leg will be 6 bars up

this next sentence is very important, if the cd leg is made in just a few bars that will strongly indicate that the cd leg is going to be an expansion of the ab leg. you can imagine as an example of this thrust principle – if you had 2 ferrari automobiles on the racetrack, one with diesel fuel the other with high tech gasoline, it would be easy to understand the high tech gasoline powered ferrari getting to the finish line first. watch the c leg, because if it starts fast, that is the faster ferrari going further, faster.

slope and time frames

the slope or time frame of the bc move can also be helpful in determining the pattern. bc legs usually will correct to one of the ratios; .382, .50, .618 or .786. the slope of this bc leg is usually a good indication of what the next cd leg will be. for example; assume that the ab leg was 15 trading bars to point b and now the bc leg has taken 8 bars and has only retraced .382% of the ab leg. this is a sign of the market absorbing a lot of selling at a high price, it is a shallow retracement and was not able to retrace to .50, .618 or .786%.  we would assume that prices would go much higher and possibly quite rapidly once the selling slows. however, if the market retraces to a .618 or .786 retracement, the cd will most probably be a normal move equaling ab=cd

time bars in the ab=cd pattern will usually be a range from 5 to 8 bars. when the cd leg is extending beyond 8 bars in an up or down move the probability is for a price extension where cd will be 1.27 or 1.618 of the ab swing

posted by Gautama on Wed Sep 18, 2013 07:04 pm

#2
i also wanted to add on wcci, tcci trades that i follow once i have identified the ab=cd pattern

i look for slowing down of momentum. to me this means, at the very least requires 2 things:

1.something to define an initial momentum direction

2.something to define the stalling and/or turn


•these are all valid plateau trade patterns to go short.  all of these could be inverted to get plateau trade patterns to go long. (check around the 200 line / 100 line in cci)
•note the evolution from a flat top to a pointy top.   nothing special about either.  the spirit of the pt is still there:  the momentum was one way, and then it reversed.
•this bottom one is just the special case of the rest where the 2ndcci bar is flat.

minimum requirements for the pt

2 cci bars up defines the momentum (up). 1 cci bar down confirms the pt to go short
2 cci bars down defines the momentum (down). 1 cci bar up confirms the pt to go long.

bottom line: 1.if you do not have 2 consecutivecci bars in one direction, you have not established momentum 2.if the 3rdcci bar does not turn againstthe momentum, you do not have a confirmed pt.  also, if the 3rdbar is “flat”, then just wait for another bar.

[img]http://i.imgur.com/s1n9225.png[/img]

these are the patterns i look for on completion of ab=cd on the wcci and the tcci 7

posted by Gautama on Wed Sep 18, 2013 07:13 pm

#3

with the above explained i'm posting some charts with examples .

the entry happens at cci 100 levels..

posted by Jadhav on Thu Oct 10, 2013 04:54 pm

#4

Prg sis,  Please correct me if did mistake in + ww hourly chart 1,3,5>>1,4>>2,4



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