As active: Traders We rely on technical analysis to help us find the lowest risk entries that have the most upside potential. So in this episode, I'm going to break down for you the ABCD pattern. This is a strategy that I trade a lot in my own trading. I Focus on trading stocks, but you can apply this pattern to Forex to cryptocurrencies to Futures It really doesn't matter because this is part of the language of technical analysis.

Now here's something that's really frustrating a lot of beginner. Traders Do not apply technical analysis correctly and in fact, it's actually worse to apply it incorrectly than to not use it at all because when you're applying it the wrong way, you're getting crossed signals. So I Think of technical analysis. kind of like traffic rules like stop signs.

When there's a stop sign, you stop and everybody respects technical analysis, which is why it works. And then you have the guy that just blows through the stop sign like an idiot and that's the person who doesn't understand technical analysis or is confusing it. Oh I Thought that was a yield. No dude, that was a stop sign.

The thing is, all of technical analysis communicates these signals. So once you learn to read the language, it makes trading so much simpler because now you're just waiting for the green light. You see the red light. You know what that means I Don't buy there.

So the ABCD pattern is a specific pattern that a lot of Traders use in their momentum trading strategies. It's specific for Trend trading for trading stocks that are moving higher. So in this episode, I'm going to break down the pattern for you, which begins with the anatomy of a bull flag failing and then coming up to an ABCD pattern. Then I'm going to show you live trading examples of how I've actually traded this pattern including a trade from today.

and I'm going to break down for you the anatomy of the stocks that this pattern works the very best on through this episode. I'm going to share a secret with you this pattern. It doesn't work on all stocks, but once you learn the stocks that it does work on, that's when things get exciting. I'm going to teach you that in today's class.

So let's go ahead and jump in to this deep dive. and we're going to jump right on to the Whiteboard. All right. So the ABCD pattern.

Let me draw this out. So it occurs when we have a strong move up. two candles is fine. it could be more, it could be less, doesn't really matter, and then we have a pullback.

Now, this pullback right here resembles essentially a bull flag. the standard bull flag pattern. So it could be one candle pullback, two candle, or more. So ultimately, to understand the ABCD pattern, you have to understand the bull flag.

And I'll show you that a couple more things about that in a second and then what ends up happening is we get a green candle that moves back up, but it does not break the high. so this is something really important with the ABCD pattern. There are certain prices that cannot break, so that's our high. A day.

when this comes back up, it fails to resolve. So essentially an ABCD pattern is a failed bull flag. Because a good ABCD pattern a good bull flag will make the the first squeeze up. it'll have one, two candles of pullback and then it's going to squeeze through to new highs and it's going to go right.

Just from there, it's it's gone, right? So so let's break down the anatomy of a bull flag quickly. Just so, we have the building blocks of the ABCD pattern. So the bull flag What we're looking at here is essentially the flag pole. the Quick Squeeze up Big move up right here.

right here. Now as this stock is squeezing up, it's going to be hitting our scanners, right? So that's the way we're going to know about it. So if I switch onto the screen, share here. You'll see um, stocks are on this scanner right here.

So this is the scanner. Uh, where? I'll end up seeing stocks that are actually making the new highs. That's where they're moving up. And this is a chart of Sprc today which actually did a a picture perfect well nearly Picture Perfect ABCD pattern and I traded it and made some money on it.

About $2,600 Nothing, nothing huge but a Green Day Nonetheless, so we have the move up and as it's making that move up right there as it's squeezing up, what is it doing? It's hitting the high of day Momentum scanner. So Sprc was hitting that scanner right here and every time it hit the scanner, we were getting an alert. A bell was ringing so we're getting the alert. We're getting the alert.

It's hitting the scanner and we'll talk a little bit more about the criteria for why it hit this scanner. second. but just for right now it's hitting the scanner, hitting the scanner, hitting the scanner. That's as it's moving higher higher higher higher higher.

Now you could of course just trade this in the move most Traders will wait for the pullback. So first we got a bull flag which is right here. so if we switch back to the Whiteboard the bull flag is the nice move up and then usually one at least one red candle, sometimes two, sometimes three. If we get to four we get to to five, we get to six.

Now it just feels like Traders were excited about it and now they just don't care. Another thing that is important to note is that the volume profile. We want to see high volume on the green candles here. so our volume bars should be high on these green candles and we want to see lighter volume on the red candles.

If we saw the inverse, we saw light volume on the green candles and then high volume all the selling candles. That would tell us that someone is taking this opportunity to sell a lot of stock or sell it short or just to sell a long position. and either case is not good because this is just going to keep fading down. So the proper bull flag which is part one of the ABCD pattern will retrace not more than 50% of the move.

So if this goes from you know, 2 to four, it could pull back to three, but it shouldn't pull back more than that. Ideally we would like to see that it pulls back to one of our moving averages and I prefer the 9 EMA Now for what it's worth, this is a pattern that could be traded Forex Futures Stock doesn't really matter. this is a technical pattern, so once you learn this language of the market these patterns, you could trade them really on any Market that you'd like I choose to trade on stock. All right.

So we have this pop up the pullback and then the bull flag starts resolving and goes back up. so a bull flag would go back up to the highs on an ABCD pattern. What ends up happening? Uh, Sometimes the ABCD pattern forms and it's a little extended off the nine moving average. so we get that first candle to make a new high, but it didn't come down quite to the nine moving average.

So it comes back up here. but it's not able to break through new high of day. It either double tops or it doesn't come back up entirely. In the example today on um, this stock, we can see how we came up.

We pulled back. We didn't come back to a double top. A double top would have been if we came all the way back to 850. We didn't come back up that far.

We came back up to just about 850 and then we dropped back down here. We drop back down to 740. All right. So from the perspective of a bull flag, this was a fine bull flag.

A squeeze up a pullback. First candle makes a new high, but it doesn't go through new high. Did it retrace more than 50% of the move? No. Did it touch the nine moving average this? Gray Line No.

Not quite. so you know it. It pulled back a little bit. Um.

but it also made a really big move from 450 all the way up to 850. That's a really big move. So something that I'll say is very common is that when we get those really big moves sometimes the first pullback the bull flag. it's just not enough to bring traders in because they look at it and they're like this thing is still really extended and so it goes up a little bit.

But as the case was with this one today, it doesn't break through the new high. So back to the Whiteboard it pulls back. so whether it goes all the way to the high or not, it pulls back and it pulls back again. All right.

So now this is an important note. So we got we have the pull back here which is A and then B is this point. So the low is A. This high is B when we pull back on point C Right down here.

we do not want to see it break below A All right, so we don't mind if it comes back down to A because then it's showing double bottom support at this level. That's okay, but we don't want to see it break below that level because if it breaks below that level, what's happening is the stock is basically it made a big move up and now it's stair stepping down. It's just stair stepping down. And if a stock is stair stepping down, that's not bullish.

I'm not a buyer on something like that, so it pulls back. It double bottoms here or it sometimes. as the case was with this example from today, it pulls back but it doesn't even go all the way down to the low. And now also the nine moving average is catching up so the nine moving average is coming up underneath the stock.

Now we get this candle making a new high here and this is a little bit tricky. Now you have the question of where in this pattern to be a buyer, right? So in this example from today, this pattern pulls back, it pops up, it pulls back and then it rips through this level. So if you had bought as it broke through new highs, you'd be in way up here and that feels rather extended because your support level is the low of the last pullback. Now the reason that's your support level which is also your stop is generally the way I think of this is if I if as this is squeezing up right here.

if I get in, you know right here. where's my Max loss? The low of the last pullback will gosh. it's way down here. If I get in up here, where's my Max loss? You know it's it's like maybe the low of this candle, but it could even be all the way back down here.

So it's really far away. So when we have stocks that are moving in these kind of waves, what I like to do is I like to set my stop at the low of the last wave All right. So a stock is moving up, it pulls back, it moves up, it pulls back, it moves up. So if I buy Here My Stop is you know is like way down here.

If I can buy here, my stop is right here. the low of the last wave right So I'd rather buy in this area than buy up in this area or even up in this area. So I want to get in as close to these waves as possible. The only challenge with this is we don't know in real time.

If you know we're go, we're gonna go like this or we're going to go. you know, like this. So when we're buying down here, how do we know we're not getting in right before this kind of drop right? In a way we don't. So this is what I look for for confirmation on this pattern.

We have the double bottom down here and again if it doesn't double bottom but it just pulls back a little bit. that's okay too. What I look for is that first candle to make a new high and as long as the stock is holding it's 9. EMA I'm interested in being a buyer right here for that first candle to make a new high.

It's essentially the same as a bull flag. This is the same pattern as if this was the big green candle right here. and this is a bull flag right? It's basically bull flag. Take two.

We're g to try again so it's the same idea, but we're just giving it a second try and in fact this can be a really powerful pattern because what you have here is a stock that initially made made a move up. It was very extended, made a huge move, pulled back, came back up, didn't have enough momentum to go through the highs, pulled back again, and so now it's had the opportunity to accumulate more buyers now. more people are interested, more people are watching the stock, and when it does break the high, that's when it can really make a big move. So in this case, certainly there could be an entry down here for First Candle to make a new high.

Now if someone is short on this pattern, let's say someone shorted up here in point B thinking oh, it's a double top it's failing to break. So they're short here and they just want to see this. You know, actually, stair step down right? They want to be shorting this for the move. Way to back down here.

So maybe a smaller position, but looking for a bigger move. So where are they going to set their stop? They're going to most likely set their stop at the high of day. Certainly, they don't want to be still short if this rips through the high, but they might even start covering just before it breaks the high. So what does that that mean? Now for Longs What it means is that as this starts approaching this level here, we're going to start seeing a lot of buying volume.

So now we've got our volume bars down here where you know we had decent volume on the move up light volume. on the pullback, decent volume on the failed ABCD pattern, light volume on the next pullback. And now volume is starting to creep up here. And now we're getting this increasing volume.

As we're going up through the highs, increasing volume means more buyers. There's more buyers, um, who are covering short positions. they're buying to cover short positions. And there's also buyers who are long traders who are simply looking to, you know, capitalize on on this momentum on this opportunity.

So this is now the ABCD pattern. So a proper ABCD pattern essentially requires part one to be a failed bull flag. and then part two is the bull flag. Resolves in terms of time frames: I Am happy to trade this on any time frame.

They're usually the most powerful on the five minute chart. I Think the reason they're the most powerful on the FIV minute chart is because it's a very clear pattern. It uh, has had the opportunity for a lot of people to see it, and so because a lot of people have seen it, you just have more eyes on the pattern and that creates more buying volume. more resolution.

I Think the 5 minute also works well because typically you have what's called multi-timeframe alignment. So multi-time Frame Alignment means for instance, um, we actually see this a lot. So this let's say, is a five minute candle. This is another five minute candle.

That's another five minute candle. And then that's another five minute candle. Just like that. Okay, so that's our five.

So that's four five minute candles. All right. So four time 5 is 20. So then on the one minute chart.

So we'll draw a little line here just to separate. So that's this is our five minute chart. Now let's look at our one minute chart. So our one minute chart and we'll just do it in.

The line is going to show one, two, three, Four Five Green candles. I Mean it could there be like a big green candle? a red candle? But it has five candles, all right. And obviously it still takes the form of the bull flag. And then there's a little bit of pullback.

Now there could even be, you know, a green candle here. Candle three, and then candle Four candle, Five candle, Six candle 7even approximately candle eight candle 9, candle 10. then. So this one minute is kind of doing what we would call a longer period of consolidation, right? So maybe you've got a flat bottom around here or something like that.

Then it starts to break out. One two, three, four, five. So now we've got a little bit of a flat top here on the high side. So what we have is a one minute chart and a FIV minute chart.

and we would call this multi-time Frame Alignment Because if we take a trade on just the one minute, we could look at the five minute be like the five minute chart still looks good I Still like it. You'll get the five minute to take the trade. The one minute still looks good. Sometimes there will be something on the one minute that screw up the 5 minute chart.

for instance. Um, something like this where the stock opens, it surges up and drops back down. and then what you end up having is you have a topping tail, right? So let's say this new candle opens and now you've got topping tail. So let's just say for instance, that in this example, it comes back up two, three, four five and so this ends up closing green.

But it's got this topping tail right? so you might look at that and be like, oh, it's still a green pattern, but now you've got this one minute sort of ugly candle right there. So one of the things that I've noticed is that a lot of times when we're having a five minute bull flag, a five minute. a FIV minute bull flag usually is a one minute ABCD pattern. So this FIV minute bull flag here is a 1 minute ABCD pattern and that is multi-time Frame Alignment You've got a pattern on the one minute that we love and you got a pattern on the five minute that we like.

and typically a f minute ABCD pattern is a one minute. That is a long period of consolidation, so it's just a long period of consolidation where the stock you know is more or less stayed within this range and it's obviously come up and down a few more times because it's on a FIV minute chart. So a good five minute ABCD pattern is going to take. Well, let's just see at a at a minimum, the least number of candles it could be would be one green candle, probably two red candles, one more green candle, two more red candles, and then a breakout.

so one two, 3, four, five six. So that's going to be at least 30 minutes. for a F minute U ABCD pattern to form. it's going to take at least 30 minutes and it could take longer.

It could be 45 minutes. You know? this could have a couple more red candles, a couple more green candles before it finally breaks. So the longer that ABCD pattern is forming on the 5 minute, it's doing a couple things. It's showing us that this stock is strong.

it is holding up, it's not selling off, it's not dropping. So it made the Big Spike and it's holding that level which is bullish. Obviously, the one minute is a zoomed in of this, so it's It's still choppy. But what we're really looking at is when can we break the high and sometimes that happens at this point right here, which is an apex when the ascending support line here, which is sometimes the nine moving average, essentially forces the stock through.

Because it's not able to break this line, you know it keeps testing it. It'll have some red candles, have some red candles, but then you know the buyers come right in. They buy it off that level and then finally it breaks right there. It just sends it through that level.

So and this would be the example of a a really extended uh ABCD pattern which at this point is more of a flag breakout. A true ABCD pattern is a bit more of this, um, you know, failed bull flag and then it goes on the second attempt. You know if it fails a third time, it's not an ABC D E F G Hi I J K, LM N O P pattern. at that point.

this is that is just a stock that is really struggling. uh, to to break out, it's just going sideways. So this really does need to go fairly quickly. If it takes too long, then that by itself is a bit of a red flag.

It's a warning sign. All right. So now we've looked at the bull flag, we've looked at the ABCD pattern. Now let's look back on the screen.

share and I'll show you how this one played out as a real example and I'll show you a couple other examples as well. I Also have a live trading uh, archive that we can U that we can take a look at. All right? So on this one today, we initially have this big move up. All right.

So this squeezes from 450 to 550 to 6, 650 to 7, 750 to 8. All right. Well, maybe we should take this moment just to ask the question of, how does a stock go up over 100% in three minutes? These are one minute candles. How's stock go up 100% in three minutes? This is clearly something we we've got to talk about that's an elephant in the room.

All right. So this is the result of a very quick imbalance between supply and demand. And what you would notice is that this occurred right at 8: A.m. right at the top of the hour.

So you know what came out at 8: A.m. News. So let's go at. let's back out of this.

Um, zoom and let's look at this news headline. All right. So at 8:01 A.. um, this company celebrates a major breakthrough.

Positive results show its treatment has a remarkable impact on Alzheimer's agitation. That's great. That's a B. You know that's a big deal, especially for a small company.

Just to make sure we're all on the same page here. What? I look for when I'm looking for a stock that I has the potential to make a move. There's a few things I'm looking for I'm looking for. Uh, certainly number one.

I'd Love to see the stock has news now. Sprc today. Does it have news? Yes. Check.

Okay, so it has news, but you know Fizer. Johnson Johnson There's There's tons of other companies that could have had news today, but probably wouldn't have gone up 100% in three minutes. So what else drives this ability for the stock to make this kind of move? Well, two Uh would be the price. The price being under 20 Uh is actually going to make it much more likely that it makes a large percentage move because the thing is a lot of there's There's a lot more retail traders in the market in terms of like individual people than institutional Traders Institutional Traders are the traders that are managing Pension funds, hedge funds, mutual funds.

They've got these huge billion doll accounts and they're trading in instruments that are lower risk. They're going to be trading Fizer and Johnson and Johnson And you know Astan these these big big companies, they're not going to be typically buying and selling. Uh, penny stocks or stocks that are under $20 I Mean, think let's just look at Sprc as an example of this: Sprc: Um, this is a stock that currently has only 500,000 shares outstanding. There's only 500,000 shares available to trade, so you know you.

You could buy this entire company's outstanding float for a a fairly small amount of money. So small that this is the type of company that would really not be of any interest to a big hedge fund. However, for retail Traders This is interesting because this is the type of stock that has the volatility to go up 100% in three minutes. And these are the types of stocks that we have seen in the past that have gone from 50 cents to $10 a share or from $5 a share to $100 a share.

I Mean we have seen moves just like that. So when we see those types of moves, those stocks almost always have news. They almost always start with a price of under 20, which makes them more affordable for retail. Traders So they're going to get more volume, they're going to be more popular.

Number three: For me to be interested, the stock has to be up 10% already at a minimum. That means it's moving right now I'm a momentum Trader And that means I'm looking for stocks that're squeezing up I'm not trying to get guess which stock is going to make the big move next I Can't do that I Have no idea what company's going to have a clinical trial result tomorrow, But when a stock comes out with that news I Want to see it? So as it's squeezing up and that's how the scanner works, the scanner brings it to my attention. So I Want to see it's up 5% or, uh, sorry, 10% Number four: I Want to see that it has, um, a relative volume relative volume of at least five times five times. relative volume means that the volume is surging right now relative to what's average over the last two weeks.

So a stock that has five times higher volume right now versus its two We average is doing something special so we could actually look at the volume on Uh, Sprc here. When it first hit the scanners, the total volume was light, But well, the relative volume on it is 14. All right. So we've got a relative volume here of 14.

And by the way, the the way this scanner works is this is searching the market in real time for stocks that have a price of under 20, that are up at least 10% that have a relative volume of five times or higher, and number Five have a float of less than 20 million shares. The float is the number of shares available to trade. So a float of less than 20 million shares that represents the supply level. So when you have a stock that has a lowlevel of Supply they haven't sold a lot of shares, and then they come out with news and it's a stock price that's attractive to retail.

Traders There's a lot of demand, and that creates a supply demand imbalance. That's what creates the big move, All right. So this is. this is the criteria for me in order for me to consider taking a trade and in order for a stock to hit the scanners.

All right. So this morning, Sprc hits our scanner at approximately let's see what time it was I'm just scrolling back on the scanner here. So the time was, uh, just about 8 803. That's when it first hit the scanner.

At that time, it was $6.7 so it was already moving up all right. Now it's fine, it was already moving up. The relative volume was nine. At that time it was up 55% which means my minimum.

The volume in total shares was low and I do have some volume filters on this so um, it it didn't hit the second. It had like one share of volume. It needs a little bit more than that for me to be interested, but volume started coming in and then it kept hitting the scanner. So what was happening in that moment is the stock is forming the flag pole.

All right. So this is where we're squeezing up right here. right at 8 A.M And each time it hits a new high, an alert is triggered on that high day momentum scanner. So that's the momentum scanner.

I Look at the news I See that we've got a headline here. So I'm like, okay, that's great And and now from that point forward, I Was interested in the chart. so I'm focusing on the one minute chart right here. Now it's important to check the daily and there's a couple things: I Check on the daily charts for me, my due diligence when it comes to daily Chart Number one: 200 EMA is the stock above it or below it.

If it's below it does it have room to come back up to it because the 200 EMA is kind of like the volume weight average price when the stock is below it. It's bearish. all right. So here's a picture of a bear and um, he's got kind of like a crooked face because he's gotten banged up a little bit and I'm gonna give whiskers like he's a little kitty cat because he's kind of like it's also kind of like a little just a little little silly little bear.

All right. So that's the bear down there I Could spend a little bit more time on, but you know what? Let's keep moving all right, right? So this is our bear down here. and if it's below the 200, EMA this is bearish. If we're above the 200, EMA this is where we're bullish and I'll just show you know, like the big muscles, this is a hand with big muscles, so that's that's the bullies.

like really strong I'm not great at drawing Bulls All right. So above is bullish. below is bearish. So if a stock hits our scanners and let's just say for instance, uh, you know this could be $6 a share.

If it hits our scander, it'ss at 585. I'm going to be like we're running right into that 200 moving average. This is a problem. It's going to have resistance here.

It's not going to be able to break through it. now. if the hits our scanners at you know, 75 cents I'm going to be like oh, that's fine. We have a lot of room.

This will be a profit. Target that's the first Target That's resistance, but we got a lot of room to get up to it. Now if the stock is above the 200, it's fine. The Bulls are already in control.

but the fact is, a lot of these small cap stocks and a lot of these pharmaceutical companies they are way below the 200 because their charts. they've been selling off for a long time and then boom they have news and that's really right there. That's the opportunity because this is where you can catch a move from $2 to $8 or $10 and you're getting a three four 500% move. So this is what a lot of active Traders are looking for.

on the daily chart, it is a bit of uh counter TR trading because you're looking for that reversal. but rather than trying to guess it, we're waiting for the actual news catalyst. So this is something that's really important. You know what comes first? the chicken or the egg.

A stock has news. Should I search all morning long for every stock ticker that has news? No, you know do should I open the Wall Street Journal and peruse through the business section for All the companies that have news. No, that's not going to work I Need to find something that is moving up because there's stocks that have news that don't do anything. There stocks that have news that go down, it's not.

The news by itself is not enough. We need the movement. We need the the momentum. So what? I Focus on I Focus on something that's moving.

So what these scanners are doing is they're looking for a stock that is moving right now. All right. So now we're looking at the actual chart patterns. Now we're trying to find our entry and and ultimately, when we're talking about patterns.

ABCD Patterns Bull Flags These are ways that we put the curent price into context and we're trying to find ultimately the lowest risk way to buy a strong stock. That's really what we're trying to do and so what we're doing. In this example. With the ABCD pattern, we've got a stock that's made a move up it pulled back.

We may have taken the bull flag pattern. We might have taken this entry down here and gotten a trade back to up here and then gotten out with profit and that would be totally fine. There's nothing wrong with that. This is a a decent Little Bull flag.

It's not perfect because it didn't go through the new High a day, but you still could have made money on the first candle to make a new high And then we let it pull back a second time, right? It chooses not to break so we're have no choice but to let it pull back. It pulls back a second time and then right there is the next entry. So this chart pattern has a couple of um, things that are worth noting: Number One Volume profile: High volume on the green candles. This is notable right? The volume on these red candles is a little bit higher than I'd Like like I Would have preferred the volume on those candles to be like half as big It This was relatively high volume considering the volume on these bars back here.

So the volume on that candle's a little higher. But basically the what happened here is the stock starts squeezing up. it's got the news. it hits the scanners.

some Traders are jumping in in the middle of this move. These are more aggressive season traders who are good at managing their risk. It then pulls back and then there's Traders here that buy the bull flag for the first candle to make a new high. You get that first candle to make a new high.

It goes up to 823 and this went from 742 up to 823. So that's almost a dollar a share. That by itself could be a great trade. Then it pulls back again and notice right here we're right off our nine moving average which is in gray.

First C To make a new high right here is at eight and it goes from eight up to uh, the the high of $9 a share. Now in this pattern right here there's a couple of things I look at really closely. the first candle to make a new high naturally I want to see volume come in. We of course did we know that our volume bar is high on this candle and then what's the next level? Well the high of the previous um the of the B price.

So we got a B C D so the high right here of B needs to break. so I want to see on this candle that it breaks through that high. So I would sometimes call that price a pivot. So if we go over to the Whiteboard and there's a couple of different different uh terms I'll sometimes use here.

So we've got the move up. We've got the pullback so we could sometimes call that the pivot goes up, doesn't make a new high, pulls back again, goes back up again and that we would sometimes call the pivot or the apex of the pattern which is the breakout point. So these are two terms that sometimes you'll hear me or other Traders use so and then that's where you get that breakout all right. So in this case because point B did not go all the way back to 850 right? it came up to 850 but then it pulled back so it pulls back.

Now when it comes back up a second time, it's got to first break this level. then it's got to break 850. So it sort of has like two resistance levels that it needs to break the high right here and then the high of day. all right.

Now in this, this case it doesn't. it goes through. and when it broke through that high of day of 850, it spiked to $9 almost instantly. And what do you think that was I would suspect that was probably shorts covering their positions for a loss.

you know there were probably some long traders that bought up there, but it was a higher risk entry. So I think the people that were buying were people who were buying to cover their short positions more than anything. Then we get this. Um, then we get this rejection.

It did not end up holding, You get some profit taking and it pulls back so this doesn't end up being uh, it doesn't end up being a picture perfect bull uh, bull flag or ABCD pattern because it didn't keep going higher. it sort of stalled out there. Then that was kind of the end of it. So now let me pull up.

Um, a couple of slides here. So this is um, the ABCD pattern and this is part of my curriculum That of course we teach So in our Warrior Pro class or in our Warrior Pro course, the Day Trading Strategies and Scaling class talks about this ABCD pattern. Uh, pretty extensively. So what I want to do here now is I want to show you a, uh, a couple of live examples um that I have recorded.

So let's look at this one first. All right. So we're going to go full screen on this. All right.

So let's pause this for a second and I'll help you get oriented first. So over on the side, this is our chart. This is an example of a stock that on the 5 minute chart has one, two, three, four, five, six green candles in a row. Wow.

this thing is moving up. It's from 369 all the way up to here us surface Oncology shares. Jump on study collaboration, right? Another biotech pharmaceutical company? no surprise there. All right.

So it squeezed up from 380 to 4 to 420 to 440 40. Right here at the top, there's a pretty big dramatic candle. This is called a dogee candle. Um, we actually call that technically a spinning top.

So that's a candle that has a body, a relatively small body, but a big upper and lower candle wick. A proper dogee is like this. The body is completely flat because it opened and closed at exactly the same price. So this is a spinning top.

In any case, it's a candle of indecision. And when you have a stock that's just gone from 360 to $5 a candle of indecision means this thing is probably about to turn around all right. So it ends up that it hits this high up here it does drop back down. it bounces right off what level.

the low of that candle on the one minute hits the nine moving average almost to the penny. And then what happens? First candle to make a new high right here at 460. so that's a possible entry. The only problem with that particular entry is that when you trade a bull flag your stop is at the low of the pattern.

so your entry is the first candle. Mak A new higher stop is down here. That's about 20 cent stop. So now when it comes to risk management, what do we want to aim for? We want to aim for a 2: one profit to loss ratio with a 2 to1 profit to loss ratio.

If you're right 33% of the time, you're break even. all right now I Aim for 2:1 In reality, my profit loss ratio is closer to 1:1 but my accuracy is about 68% which means I've made a lot of money. This is where the profit comes in. and ultimately I Really think it's important to aim for accuracy of above 50% because higher accuracy breeds confidence.

And when you're self-confident when you feel good about your strategy, you're able to scale up, you're able to be more aggressive. Losing your confidence is one of the worst things that can happen as a Trader Because when you're not confident you trade more conservatively, you hesitate. You miss opportunities. So as a active Trad Trader No matter what Market You're trading crypto Forex Futures Stock Maintaining your confidence is important, so talk a lot about that.

But for right now, let's look back at this. um, this example. So so we get a bull flag on the one minute pulls back and it squeezes up here to a high of five and I think it actually halts up there. It ends up opening drops, pops, sells a little lower, and comes back up.

This is a little bit of a strange pattern because the high is marked by a red candle, but it's on light volume. That is odd. The highest volume in fact is not the candle that is the peak. it's this candle right before the peak.

And that is because this had a trading halt. So because trading was halted, it stopped trading in the middle of this one minute candle which prevented more volume from going through it, then resumed on this candle a little lower because it was so extended. Traders Were probably trying to sell during the hall, they were able to sell on resumption so it ends up opening a little lower. Uh, sorry about that.

it dips down and then buyers come in and once again right off that nine moving average. they buy the dip but for a bull flag it's not able to go back through the highs. It pops up here to 519. it pulls back to about five and now this is starting to look interesting.

So in this pattern we have an apex at 519. that's the high of this candle. This green candle our low is down here at like 475 so that's like a 40 C stop that's a little ways away. But what I will sometimes do is I'll say all right I Like this pattern, I'm going to buy it for the first candle, make a new high like right around here.

or maybe I'm just going to add at 519 and rather than set a stop way down here 475, I'm just going to set a stop at like 501. Why not $4.99 Well this comes into areas of psycholog, local support and resistance. So $5 a share. It is very common that a stock and don't mind it.

it being in blue just struggles to break a level, pulls back, busts through that level, comes back down and retests it. If it can hold, we're back up to the next level. However, if it breaks, usually we see a big drop. so if you try to put your stop right underneath that level, you're actually going to get end up ended up getting filled down here cuz could drop with so much volume you're going to stop out low.

Now on the other hand, stopping right above that level feels kind of silly because you stopped out on support. but you're going to lose less if you stop out faster than if you risk the breakdown. So that's kind of My Philosophy I'd rather keep my losses really small than get married to a stock and get stubborn about it. So in this case we have the move up.

uh, or in the case over here, we have this move up up and I'll say you know what? I'll just set my stop at 501. All right. So that gives me about a little less than a 20 cent stop. and now let's watch this pattern.

So now we're going to watch this play out right here. Boom. look at that. I Mean it's crazy how fast that broke through that level that just went up to 550? I Mean that's like a 30 Cent Instant Pop Okay, now the question again on this pattern is is it going to hold this level there? It is 550.

It's back up at that high 551 right? And as we can see on the level two, this is actually about to get halted here at 551. So it's pinning up at that level 551. Right here is a H level of 42% So now it's halted it at this point. Right now, trading is Frozen Uh, it.

in the stock market this is different than other markets. but in the stock market we have these halts and and these are volatility trading pauses. And when these happen, you cannot buy and you cannot sell. And this confused a lot of people during GameStop era because um, there? Well, there was.

There were a few things going on during that period that were confusing for people. Um, one of the things that was happening was that um, the stocks were getting halted due to volatility SO trading pauses. A stock would go up uh, 10% in a five minute period and it would Halt and it would halt for a period of five minutes so there'd be no trading and then it would resume. And all of a sudden this trading begins again.

And then we also had the issue where Brokers were restricting trading and that was sort of a whole another thing. but the trading halts themselves are very common. So um, all right. So that was um, so that was a nice little example there.

and let me see if I can get you another one here. Um, aai. All right. So got another one that we'll look at here and I would also I would I Would say that it's worth being aware of the fact that um, an ABCD pattern by itself is not a strategy.

it's just a pattern. That's all it is, all right. So the strategy comes when you add in the rules about how you trade this pattern, what time of day you trade it on, what type of financial instrument you traded on, and so forth. So I think that that's just something that's worth mentioning.

All right. So here we have, um, the chart right over here. This is another example of a stock that went from A120 all the way up here to A190. That's a big move.

So we have a really nice big move here. Now we have a pullback. It pulls back down to volume weight, average price, and it pops back up. This is not uncommon in this case.

This pullback candle on red volume was a bit higher. so essentially this looked like a reversal and then when it bounces back up here probably I wouldn't have felt comfortable buying right here because this just looked like it was really weak and then it pops back up. It drops down a second time and now as it bounces up again, you're like wow, Okay, this thing is actually holding up and so I have this pivot level drawn right here or this Apex that if it can break over this red line now you know we're kind of going back to the high of day and that's what ends up happening in this example. It does break through that line and it pops back up.

So let's see if I can get this video to play again. Oh I wasn't on full screen. All right. So there we go go back to full screen.

All right. So let's see. Oh you know what? I think this was? Um, all right. So anyways, nonetheless, um, we'll see if I can fast forward this.

So there we go. So you see how it comes up to, um, $189 and then there's $190 $1.93 This is the level two on the stock. We've got 6 million shares of volume. We're up 89% and look at the volume on this candle.

This is a really high volume candle right here. You know this has a solid 800,000 shares of volume Now in a perfect world. What we would have lik to have seen on this is the stock squeeze through $2 a share because on the five minute you could see we don't really have multi-time Frame Alignment This five minute is just getting more extended. It had a dogee on the last candle.

Now it's going a little higher so that is a little challenging. Um, but in any case, the one minute is okay. it's just not. It's not perfect.

We don't have perfect multi-time Frame Alignment So now watch this. so it does end up coming up here. Let me back this up real quick and it happens fast. Look, it breaks $1.95 five and this is also where we start combining reading level two with reading the chart.

So on the chart we know we've got resistance at $2 right? So you know the stock has, um, you know, had its nice. Move up it. We'll just do this in green, pulled back, kind of did a bigger pullback, then it pops back up, then it pulls back again and then it comes up here and it does break through the high, but right at this price, it's $2 psychological resistance. So now the stock pulls back just for a moment and right here it starts getting some buying volume.

So now what it's doing is it's testing the psychological area of resistance. and if this can break and hold over two, this resistance becomes support. so we're going to look for it to break over that level. We'll expect that it may retest it and if it holds, that's a place to add for the next leg up.

And now what you really have is a stock that is stair stepping up right? These are steps higher and this we sometimes call that a stair stepping pattern. So I Set my low with the Um, my stop is the low of the previous. step right down there, right down there and we're continuing to move higher. All right.

So now let's watch this play out all right. So on the level two, we can see before it. In a way, this is more accurate for predicting what's going to happen because this is where we're seeing the actual tape. We're seeing the actual orders going through.

So now we've got a bunch of orders at 98, right? there's 99. There's $2 It breaks over two. Now we're 202 205, right? So that was a really nice strong push through that level. Now the volume is still a little light right now, but we have some time left on this candle.

so there's now. look. the retest of $2 This broke over. Now it's coming back down and retesting.

So this this is something that this pattern. You know when we look at this pattern in isolation without price, you might be like, why would it have resistance at this point in the pattern right now Typically you wouldn't. Typically when you have a stock, I'll just erase this for now. you know.

Typically when you have a stock that gives you that nice ABCD pattern, so we'll just do. this is going to be kind of interesting. So I'm going to just for the the sake of marker, um, or ganization, look at that. It's an ABCD pattern.

Okay, so typically you wouldn't have resistance like right up here. You know, typically you would have resistance like as it breaks through the high right here. But not up here. Except if right up here happens to be a whole dollar like $2 but it could be the same.

It could be. you know, five $5 Now once the stock gets a little higher priced like8 N9 $10 may not have as much, but you still, you still can have some resistance at half and um, whole dollars. All right. So what that means is it's going to come up to that level, it's going to pull back and this can be a problem if the stock happens to be forming this entire ABCD pattern.

you know, let's say where where would be a spot where this would be really difficult. It would be really difficult if this was $2 just like 5 cents above the breakout because it's going to be like a breakout and it's going to run into resistance. but it would also be pretty difficult if like this was $2 because then you're going to have a struggle down here before you're I Mean once you clear it, you're in good shape. But if you're having a struggle kind of in the middle of this pattern, so this is something you kind of have to be able to overlay on top of the chart pattern.

The chart pattern, you know is Not absent the price of the stock. However, typically these patterns are going to occur usually when they top out up here. usually. Now let's let's look back at our example of um, Sprc just for one second.

All right. So if we look at Sprc U we'll just back this out for just a second. We look at Sprc. Where did this top out? $850 Half dollar? Where did it top out here? $9 So it's actually very common in a way that we see these patterns occurring Um, in between these levels of support and resistance and psychological levels.

So that is actually it. It is very common, but you know there are times where for whatever reason it comes up to, you know, 185 and just there's a big seller there, it has resistance and then that's the top of that pattern. So I try to pay close attention to this and one of the things that I really do like doing in my own trading and this is sort of separate from Trading flat top breakouts and and or sorry sorry ABCD patterns. but I think of these stocks is trading in these ranges.

so this is five, This is six, This is seven. This is eight. So I'm just gonna go like this. just do a little dotted lines.

So let's think about this just in a price sense for a second. So if we know that a stock right now is hitting the scanners just broken through five for instance and it has a really good Catalyst I'm going to be starting to think all right and we don't. Let's not forget about half dollars got half dollars I know that it's going to trade um with respect to these areas. So if I could get in this at 550 so if I could buy it right there at 550 as it breaks 550, I'm going to set my stop basically right at that level.

If I want to set it right under at 548 or I want to set it right above at 551, you know it kind of depends. but if I get in at 550 and it goes right to 575, five, 580, the next resistance is six. So sometimes on this the second it comes up to six. if it looks like it's going to break and it breaks, I'll add more shares to 601 now I'm adding more shares right up here.

My cost basis is moving up, but I'm trading right around these levels I wait for it to pull back and then I add more wait for it to pull back, add more wait for it to pull back and add more. And what happens for a lot of these is they may not. You may have a one minute or five that just has green candles, but what's happening is it pulls back and then goes higher. Pulls back, goes higher, pulls back, goes higher.

It's very common that we trade in this kind of area this kind of way and then eventually you know we get sort of a Sharp drop and this the first red C then a little bounce off the low and that's of course a red candle. So you get your first red candle that forms like this and then maybe green but then closes red and now we're starting to form our one minute pattern on the other side. So now we're getting a one minute bull flag and then we're going to look for that first candle to make a new high. Maybe we'll double top, but it's very common that all of this is happening around these price levels.

All right. So now let's look back at um, this example again. Okay, so we're coming up here and and here in this case you could see we broke below two. So this is this is not what I like to see.

What happened is now the stock has pierced that resistance level. but the Bears were able to bring it back below now. Nonetheless, this was still a successful ABCD pattern. but it's just a funny ABCD pattern because the Apex down here was at like 86, the break was 90 and then we ran into whole dollar resistance like 5 cents later.

So this is just not a perfect pattern from the perspective of where the price was occurring. You can see right now it's got this little struggle above and below this level. So now we're back to 206, right? So it's kind of coming back up. Unfortunately, at this point it's great if it can hold over two, but now you've also got one, two, three, four green candles in a row.

It's kind of due for a pullback and it didn't even have a clean break of the whole dollar. So this is where we can start to churn. See how there's a big seller up there at 210 so it $210 We had like 177,000 shares. it breaks goes to 212 but then there was another seller up there.

The seller is flashing at 214. So 214. another 20,000 shares. So now you've got profit takers.

Maybe you have short Sellers and you know it's it's tough right? This thing is just kind of. It's grinding higher, but it's just getting more extended and on the five minute. we don't even have a bull flag. So that's a little bit of a problem with this.

ABCD pattern on this one is that it happened so quickly that it didn't give us the chance to form a bull flag. and sometimes you know it's funny. So this is 945 right here. so that's 945 right there.

That's 9:45 so 935. So like 940. So like this candle right here. uh was this dogee right there? That dogee.

So if this had pul. if this had weighted like two more minutes before breaking out, then this candle here would have been a red candle and you would have had a dogee a red candle and then first candle make a new high. So I'm often looking at that the chart and I'm thinking okay, if this can just wait two more minutes we're actually going to have a nice bull flag and I'm like I hope it waits because if it does wait, it's going to be a stronger setup. It's going to be a cleaner setup, but sometimes they don't wait, they just go without us.

So the patterns they are as they form and they come up to those levels I'll trade them. but it's just funny because sometimes you sort of see that it's about to form like it. it's almost like I don't know you've ever seen someone trying to take a picture of a you know, like a uh, a a solar eclipse or something. uh or a Sunset and then you know a plane flies like right across it or a truck Parks like right in their way.

It's like it was so close to being perfect. but you know the these things happen. So anyways, um I'm going to back this out here. So this is our Um so I think those are two good live examples or we've got the two live examples.

and then we have uh, the trade from today that I got which was a nice trade. Uh, One of the things I think is important to be aware of is that at least in my opinion. um, my job is to focus on trading the right stock. and if the right stock the right stock should have news.

price between you know under 20 be up at least 10% five times relative volume float of less than 20 million shares. So so if the right stock comes up and it has news you know it's it's strong then I don't really care if it gives a bull flag an ABCD pattern, a cup and handle pattern, a head and shoulder pattern. it doesn't really matter I want to trade it? So I Think that that's important for you guys to think about is um, as beginner Traders or intermediate Traders is all right Am I trading the right stock because you could trade this ABCD pattern or try to trade it on the S&P Or you could try to trade on a stock that doesn't have high relative volume and and it's more likely to not work than work. What allows this to work so well is that there's so many other Traders watching it because the stock the instrument is obvious.

Now an ABCD pattern that occurs on like Bitcoin you're gonna have a lot of people watching it so it'll probably resolve better, especially if it's on a longer time frame. But on, you know, you know, Cocacola on Pepsi Not a lot of people are going to be watching that for AC trade so it probably won't resolve well. So what's more important than searching for the perfect pattern is searching for the perfect stock and then having more patterns in your kind of, you know I don't know toolbox so so to speak that you can pull out to apply to the right stock. So the first goal ultimately is mastering just one pattern, memorizing it, printing out tons of examples of it all over your trading station.

So when you see it starting to form, you're able to visualize what's going to happen next. Once you get really good at that with one pattern, you add a second pattern. you get good at a second pattern. you add a third, you add a fourth, you add a fifth, then eventually next thing you know, you've got half a dozen uh patterns that you're relying on on any given day.

And that's when you get into Flow State. You find the stock you like and now you've got a lot of patterns that you can trade and the ABCD pattern. It's a good one and it's It's not my favorite. My favorite would be a bull flag that doesn't fail, so you know.

Unfortunately, an ABCD pattern is already started as a failure, but it has a chance for Redemption and it can be a very strong pattern. so I like it a lot. It can work well, but my favorite would be the bull flag. Uh, second favorite micro pullback.

third favorite. trading. just simply around half dollar whole dollar psychological areas of resistance. Ultimately on those micro pullbacks, um, and then I'd say you know cup and handle pattern and then the ABCD pattern so it's in the top five for sure.

Top six. Uh, but I know it's one a lot of Traders like. So I wanted to talk about it a little bit more detail in today's episode. so if you enjoyed this episode, make sure you check out the one right here that YouTube thinks you're going to love even more.

I'll see you for the next upload real soon.