Thread: XABCD Diagonal pattern definition

Hi All,
Why do WW patterns fail...? I recently stumbled across some educational videos by Georgtrio at http://www.stochastic-macd.com/convergentsignals.htm that may help to see things more clearly. The videos deal with convergent signals, which is an area where bulls take profit and bears enter the trade, making for a very powerful confluence of opinion and strong moves.
In the chart below, you will see a WW formation that fails to reach the 1-4 line, as there is strong support to the left. Also, the 1-3-5 line diverges from the 2-4 line; does this divergence indicate a WW failure? I have read that the WW lines should converge; maybe this factor makes the difference between pattern success and failure.


In his videos he also talks about the AB=CD pattern and the fractal nature of price across time frames.



Regards,


Mike

HI All,
Two charts here with WW patterns that did hit the 1-4 line. Notice how the lines 2-4 & 1-3-5 steeply converged, and that point 5 only just poked through the 1-3 line. Maybe this is the answer to a more successful WW pattern; that a wedge exists and the wedge is steep, and point 5 only just pokes past the 1-3 line? Or, is success also better when point 5 doesn't quite get as far as the 1-3 line?





Regards,


Mike

@blott: maybe also try to find some confirmation rules with the volume

Originally Posted by kor4x

@blott: maybe also try to find some confirmation rules with the volume

HI Kor,
Thanks for the suggestion, but I've not yet been able to definitely any correlation between volume and success of a WW. Sometimes volume is high and sometimes it's low at a turning point.

Regards,


Mike

@blott: so maybe it's not the turning point that is important, and you could check how the volume behaves during the move (before the turning point).