ABCD Chart Pattern
Our most popular Day Trade Pattern
The ABCD pattern is the most straightforward chart pattern to identify.
The ABCD pattern starts (A) with a strong movement up towards a high (B) which is being followed by a cooling down period. When a low (C) is formed and this behaves as a support, a further increase is likely to happen towards a new high D.
Day traders, such as ourselves, try to ride the movement up between C and D.
ABCD Pattern explained
The ABCD pattern starts with a strong movement up. Buyers are aggressively buying and pushing the price up towards B, making a new high of day. At a certain moment, B is reached. However, while the pattern is forming, it’s not possible to predict B. The only thing that we know, is that after a quick and steep price increase, so before B, there will always be a cooling down moment; that’s just right after B. At and after B, traders are taking their profits of the table and push the price lower.
What we see now however, is that a support at C is formed. If the price holds C, which is above A, and the price starts increasing again, we can conclude a support has been formed. When you see this support showing up, you should start planning your trade.
ABCD Pattern sentiment
The ABCD pattern starts with news. Traders are excited and the stock price rips up.
After a steep increase, traders become anxious of a drop which is inevitable. Once the price start decreasing, a significant correction might take place.
Howerver, if the news was 'fundamental', a support C will be formed. Traders become confident when seeing this and the price will bounce up again towards D.
