Bearish AB=CD

BearishReversalIntermediate

Two equal rallies in a row. The second often stalls where the measuring says.

Verdict: SkipBitcoin 4H: 20 trades, won 30%, avg trade −2.6% vs random day −0.5%. Backtest

ABAB
Bearish AB=CD: textbook shape, step by step

Price rallies from A to B. That rally is the ruler.

step 1/7

Trade rules

DirectionShort (sell)
EntryC retraces 38.2-88.6% of AB; CD equals AB in price (±5%) and takes 0.5-2x AB's time. Once price drops 2% from D (2.5% on stocks), a candle CLOSES below the low of the D candle within 5 candles.
Cancelled ifPrice trades above D before that close. No pattern if price drops back below C before D, or the second rally runs more than 5% longer than AB.
Target61.8% of A to D, projected from the breakout
3 common mistakes
  • Shorting the moment CD equals AB, before price turns.
  • Fighting a strong uptrend with a pattern that needs a top.
  • Measuring the legs in percent on one and in dollars on the other.

Backtest

same rules every time · equal size · no fees · method
MarketTradesWonAvg tradeRandom day
Bitcoin · 4H · 2017-20262030%−2.62%−0.49%
US large caps (50) · 1D · 2016-202616441%−1.02%−0.94%

Verdict: SkipLost money on average in every market tested.

pattern −52%random −9.8%
Bitcoin 4H: pattern −52% vs random day −9.8% over 20 trades
pattern −168%random −155%
US large caps (50) 1D: pattern −168% vs random day −155% over 164 trades

Real examples

Bitcoin · 4H

Breakout Sep 2, 2017, exit Sep 2, 2017 (target)+5.58%
ABCD = ABD candle lowA4,125 · Aug 28, 2017B4,648 · Aug 30, 2017C4,416 · Aug 30, 2017D4,939 · Sep 2, 2017Entry
Bitcoin 4H, real candles from Aug 28, 2017

Microsoft · 1D

Breakout Sep 18, 2024, exit Oct 31, 2024 (target)+5.51%
ABCD = ABD candle lowA385.58 · Aug 5, 2024B426.79 · Aug 22, 2024C400.80 · Sep 6, 2024D441.85 · Sep 17, 2024Entry
Microsoft 1D, real candles from Aug 5, 2024

Amgen · 1D

trapBreakout Aug 1, 2023, exit Aug 4, 2023 (stop)−3.61%
ABCD = ABD candle lowA211.71 · Jun 1, 2023B231.95 · Jun 16, 2023C218.44 · Jul 7, 2023D238.48 · Jul 20, 2023Entry
Amgen 1D, real candles from Jun 1, 2023