Retracement Patterns
Christopher Terry
[Link]
Points of Discussion
1. Structure of a Trend
2. Four Types of Retracement Patterns
3. Applying LBR Indicators in the direction of the trend
4. When Not to look for retracement patterns (Three
Pushes, Non‐Confirmation, Bull/Bear Traps and U
Turns) and failed retracement patterns.
“Technical Analysis in its purest form is the study of price action,
its trend, and the discovery of its repeatable patterns”
Trending Market
• Up Trend: Series of higher highs and higher lows ‐ Price advances
past previous highs, price declines fall short of previous lows.
• Down Trend: Series of lower lows and lower highs – Price declines
past previous lows, price advances fall short of previous highs.
• Strong trending markets have greater odds of continuation then
reversing.
• Traders focus on retracement patterns as a means to enter a trade
in the direction of the trend.
“A trend should be assumed to continue in effect until such time as its
reversal has been definitely signaled” – Dow Theory
Retracements
• Retracement Patterns – also known as “correction” or
“pullback”.
• In a trending market ‐ Retracements of a trend are typically
between 1/3rd to 2/3rd of the market gain or loss.
• Price retracements will relate to prior swings depending on
the time frame.
• Four basic retracement trades, simple, complex abc,
expanding & triangle patterns.
Simple Retracement/Non Complex
Bear flag Consolidation/Retracement
“ABC Corrective Wave Up”
“ABC Irregular Corrective Wave”
Horizontal Correction‐Triangle
Example of Trend Daily Chart
ABC irregular /LBR osc.
Multiple Time frames
Daily ABC/w LBR 3/10
Non Complex Retracement /Sell Div.
Non Complex Retracement /Sell Div.
ABC Corrective wave/ Sell Divergence
WHEN RETRACEMENTS ATTACK
When NOT to trade Retracement Patterns
• Short Covering Rally or Long Liquidation flush
• Divergence patterns
• In a Trading Range ( U‐turn not ABC)
• Shift In Momentum after Extreme Volume.
• After a Large Gap.
• Higher Time Frame vs. Lower Time Frame.
Lower TF vs. Higher TF
Trend Ends With Climax
ABC vs. U‐turn
Buy Divergence in Range (not ideal retracement)
Volume Climax/Shift In Momentum
Gaps vs. Retracement
Thank You!
For a copy of this presentation or any additional
questions, email to
LBRgroupinc@[Link]
[Link]
