TFNN: Tiger University - Tom O'Brien on ABC Analysis - Educate yourself on technical analysis, fibonacci, candlestick charting and more.

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ABC's (Tom O'Brien 2003)

What are ABC’s and Fibonacci? The information is extensive and beyond the scope of this overview, but explained in detail in my book Timing The Trade.
ABC’s are a chart pattern that you can learn to recognize. Fibonacci numbers as used in this application are the relationship of the numbers 38.2% and 61.8% to highs, lows, and the current stock price. There is additional leverage in identifying the connection between the price of a stock and the various mathematical streams created as a stock price goes up or comes down.

ABC's Up!

An 'ABC' is a pattern used to identify the potential value of a stock. Once a stock begins to establish a recognizable rise (a leg), it will at some point level off and ‘retrace’ for a period of time while it catches its breath and some investors take profits. The leg up is referred to as the 'A to B' leg
and is equal to the difference between the highest intraday high at ‘B’ and the lowest intraday value when the leg began the upward run (A). The next value is 'C'. 'C' is the value of the stock when it once again starts to rise from the retracement pattern range and begins to build a confirmed leg up. This is the 'C to D' leg. In simple terms the values are (A to B) = (C to D).

ABOUT THE AUTHOR

Name:
Tom O'Brien
Website:
www.tfnn.com

Tom O'Brien is the CEO and founder of Tiger Financial News Network. Host of two radio shows, author of two newsletters and author of critically acclaimed book 'Timing the Trade'.
Click Here for Complete Bio

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Timing The Trade
by Tom O'Brien
The workbook is filled with helpful illustrations, graphs, and charts that demonstrate how to use volume indicators, Fibonacci Analysis and other techniques.

Order Timing The Trade Now

Note that in an ABC pattern - as the price of the stock retraces from B to C, so should the daily trading volume. If a stock declines on heavier volume, trouble is on the way as sellers are driving the price down. For the ABC to be valid, when the ‘C’ breaks out above the ‘B’ value, volume must also be higher than on the ‘B’ day in the pattern.

ABC's Down!

An 'ABC' DOWN is a pattern that is just the opposite of an ABC Up. Once a stock begins to establish a down trend or leg, it will often at some point level off and trade sideways or rise (retrace up) for a period of time as the immediate selling pressure eases and optimistic buyers are lured in and begin to push the stock value higher. The first down leg is referred to as the 'A to B' leg, and is equal to the difference between the highest intraday value at the top (A) and the lowest intraday value of the leg at the first bottom (B). The next value is 'C'. C is the highest intraday value of the stock in the ‘B to C’ leg retracement. There is no longer enough buying demand to maintain the retracement rise, thus this begins the 'C to D' down leg. Just as in the ABC Up pattern, the values are: (A to B) = (C to D)
but have the opposite outcome... lower target values (D), versus higher.

Note that for an ABC Down pattern to be valid - as the price of the stock retraces from B to C, so should the daily trading volume. If a stock rises on heavier volume, demand is driving the price up and the ABC Down may not form. For the ABC Down to be valid, the ‘C’ must break below the ‘B’ value on higher volume than on the 'B' day.

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