Parabolic Arc patterns continually makes higher highs and lower lows in the beginning stages but can be volatile in the exhaustion and reversal stages, especially around base 3. The reason why base 3 becomes the most profitable is because many short traders are forced out of their positions usually creating an excess steep of supply for buying. This in return drives price to base 4, which is the most profitable stage within the parabolic trend.
Irrational buying in the public generates a strong rally to push prices vertically, followed by a steep sell off. Examples of this market types are the NASDAQ markets during 1990–2000 (retraced 80%) and Gold prices from 2000–2011 (retraced 62%). Bitcoin did the same thing back in 2018, with retracements of over 80%.
Parabolic arcs are a reversal pattern and has a very predictable outcome - if history repeats itself. As we may be approaching a breakout of a base 3, we can see incredible gains. Remember, the most important thing for this post is the historical comparisons. There is no reason for it to happen, and can change course ANY moment. Although they are predictable, they are relatively difficult to trade since the market sentiment is and may be relatively tough to point reversals to trade, especially when entering unknown prices (it becomes very difficult to understand the real price of the asset).
In summary, the basic ideas behind the Parabolic Arc pattern is:
- Pattern is generally easy to spot but difficult to trade with excessive .
- Most Patterns retrace to 62–78% of its rise. should be the first target.
- You do NOT want to overstay in your trades. This is a perfect testimony of what happened back in 2018. MANY got trapped.
- Do not expect the price to return to Parabolic Arc highs for a very long time.
It's an ugly Truth.
Is it possible to be able to determine resistance in unknown territory with these patterns or are we simply at the whims of the whales?