Parabolic Price Action
"1. What is the Parabolic Arc?
Parabolic Arc chart patterns are generated when steep rise in prices are caused by irrational buying and intense speculation. Parabolic Arc patterns are rare but they are reliable and are generated in mega bull trends. These patterns trend gradually making higher highs and lower lows in the beginning stages but can be volatile in the exhaustion and reversal stages.
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 bullish markets during 1990–2000 (retraced 80%) and Gold prices from 2000–2011 (retraced 62%).
Parabolic arc is a reversal pattern and has a very predictable outcome. Although they are predictable, they are relatively difficult to trade since the market sentiment is bullish and may be relatively tough to point reversals to trade. Most Parabolic arc patterns have a significant correction of 62–79% of its price rise (from the top).
The basic ideas behind Parabolic Arc patterns:
Pattern is easy to spot but difficult to trade with excessive volatility.
Most Patterns retrace to 62–78% of its rise. 50% retracement is first target.
Do not overstay in your trades
Stay away from “Parabolic Arc” patterns buying (after retracements) as you truly never
know where/when it will start reversing.
Do not expect the price to return to Parabolic Arc highs for a very long time.
Trade: In Parabolic Arc patterns, prices move up vertically and eventually the acceleration comes to a stop and then reverses. Prices start showing lower-lows and may attempt to regain the top again. Draw a channel connecting the top and bottom of the pattern. Enter a “short” trade at the second failed attempt to test the peak or at the channel trend line breakdown connecting the major swings.
Target: Measure the distance of the rise from the base to the top of the pattern. Most Parabolic Arc patterns return to the 62–79% of its rise.
Stop: Protect the trade by placing few ticks above the high of the Parabolic Arc."
SOURCE: blog.stocktwits.com/the-parabolic-arc-pattern-or-how-to-profit-from-euphoria-and-bubbles-a732cc750c2b
Parabolic Arc chart patterns are generated when steep rise in prices are caused by irrational buying and intense speculation. Parabolic Arc patterns are rare but they are reliable and are generated in mega bull trends. These patterns trend gradually making higher highs and lower lows in the beginning stages but can be volatile in the exhaustion and reversal stages.
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 bullish markets during 1990–2000 (retraced 80%) and Gold prices from 2000–2011 (retraced 62%).
Parabolic arc is a reversal pattern and has a very predictable outcome. Although they are predictable, they are relatively difficult to trade since the market sentiment is bullish and may be relatively tough to point reversals to trade. Most Parabolic arc patterns have a significant correction of 62–79% of its price rise (from the top).
The basic ideas behind Parabolic Arc patterns:
Pattern is easy to spot but difficult to trade with excessive volatility.
Most Patterns retrace to 62–78% of its rise. 50% retracement is first target.
Do not overstay in your trades
Stay away from “Parabolic Arc” patterns buying (after retracements) as you truly never
know where/when it will start reversing.
Do not expect the price to return to Parabolic Arc highs for a very long time.
Trade: In Parabolic Arc patterns, prices move up vertically and eventually the acceleration comes to a stop and then reverses. Prices start showing lower-lows and may attempt to regain the top again. Draw a channel connecting the top and bottom of the pattern. Enter a “short” trade at the second failed attempt to test the peak or at the channel trend line breakdown connecting the major swings.
Target: Measure the distance of the rise from the base to the top of the pattern. Most Parabolic Arc patterns return to the 62–79% of its rise.
Stop: Protect the trade by placing few ticks above the high of the Parabolic Arc."
SOURCE: blog.stocktwits.com/the-parabolic-arc-pattern-or-how-to-profit-from-euphoria-and-bubbles-a732cc750c2b
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