The bearish AB=CD pattern is a harmonic price pattern used to identify potential market reversals. It consists of four points (A, B, C, and D) and two equal-length legs (AB and CD) that form a specific geometric structure. Here’s a brief overview:
Structure of the Bearish AB=CD Pattern
1. **AB Move**: An upward price movement from point A to point B.
2. **BC Retracement**: A downward retracement from point B to point C, typically 61.8% to 78.6% of the AB move.
3. **CD Move**: An upward move from point C to point D, equal in length to the AB move.
Key Characteristics
- **AB = CD**: The AB and CD legs should be of equal length.
- **BC Retracement**: Should be between 61.8% and 78.6% of the AB move.
- **CD Extension**: Often 127.2% or 161.8% of the BC leg.
Trading the Bearish AB=CD Pattern
1. **Entry Point**: Enter a short position near the completion of the CD leg (point D).
2. **Stop Loss**: Place a stop loss just above point D.
3. **Target**: Set initial profit targets at 38.2% or 61.8% retracement levels of the CD leg.
This pattern helps traders anticipate reversals, allowing them to make informed trading decisions. Proper risk management is crucial when using this strategy.
Structure of the Bearish AB=CD Pattern
1. **AB Move**: An upward price movement from point A to point B.
2. **BC Retracement**: A downward retracement from point B to point C, typically 61.8% to 78.6% of the AB move.
3. **CD Move**: An upward move from point C to point D, equal in length to the AB move.
Key Characteristics
- **AB = CD**: The AB and CD legs should be of equal length.
- **BC Retracement**: Should be between 61.8% and 78.6% of the AB move.
- **CD Extension**: Often 127.2% or 161.8% of the BC leg.
Trading the Bearish AB=CD Pattern
1. **Entry Point**: Enter a short position near the completion of the CD leg (point D).
2. **Stop Loss**: Place a stop loss just above point D.
3. **Target**: Set initial profit targets at 38.2% or 61.8% retracement levels of the CD leg.
This pattern helps traders anticipate reversals, allowing them to make informed trading decisions. Proper risk management is crucial when using this strategy.