Tools: AB=CD Pattern

Here is the AB=CD tool shown using the Formations Tool in Ensign Windows. The chart also has the Pesavento Patterns tool which drew the dotted lines with the percent retracement values. The tool is showing Fibonacci levels positioned from point C that are a measure of the AB leg.

The properties have set the CD leg to be equal to the AB leg by using 100.0 as the parameter on the C-D row.

To draw the Elliott Wave ABC lines on a chart, click the Draw Tools button on the main button bar, and then click on the Formations button. The cursor will change to a pencil while in the draw mode. Use ABCs to mark price and time movements from important highs, lows, and corrections. They can also be used to indicate the possible turning point of the current trend or correction.

Three points are necessary to draw ABCs on a chart. To draw the ABC tool on a chart select the 1st point from an intermediate high or low by moving the cursor to the point, then hold down the left mouse button and drag to the 2nd point (end of wave A). The 2nd point should be the high or low of the subsequent correction. Release the mouse and then move to the 3rd point (end of wave B). The 3rd point is generally the point where the correction ended. Click the left mouse button to mark the 3rd point. You have manually traced the A and B waves, and the tool forecasts the C wave. The principle is that wave C will have the same magnitude, duration, and slope as wave A.

The following illustration was cut from the middle of a customer's chart which was sent to Ensign Software as an e-mail attachment.

It is always refreshing to see customers putting to good use the tools and features built into Ensign Windows. Let's talk about some of the tools and studies I see the customer is using in his analysis. The A and B waves of the yellow ABC tool helped correctly forecast wave C. The A and B waves of the following white ABC tool have helped forecast the slope and extent of its wave C, which this customer traded short and nailed a great exit price. I believe the customer actually sold the market short at the levels indicated, and covered his short trades at the levels marked by 'Out'. So, he uses the ABC wave forecast tool in his analysis and marked his trades using the Arrow tool.

The chart shows a study, possibly some kind of averages of the bar highs, bar lows, and bar closes. I do not know which study is on this chart, its parameters, or its interpretation. The customer also uses three more studies drawn in two study sub-panels below the chart (not shown). The vertical lines of blue dots are from a cycle tool. The bars are drawn using candlesticks, and painted with the Trends or Small Trends color bar study. Well, you might ask, 'Why don't I know more details about what this customer is doing?' I didn't ask, and he didn't volunteer any details. Besides, all I am trying to show with this illustration is the use of the ABC tool in real-time trading, which has been done skillfully. I consider an actual undoctored example worth a lot more than my putting an ABC tool on a chart with the benefit of hindsight. This illustration of the ABC tool on an actual chart is an excellent example. I hope you have picked up an idea or two to use in your trading.