Dow Made a Parabolic Move: Did You See the Signs?

29 Sep

The Dow made an unsustainable Parabolic Arc that is a giant U-shaped pattern on Friday, September 27. Did you see the signs? I missed some of them, which lead to a much closer look at what price action moves lead up to a highly volatile ascent and steep drop that's also known as a "Pump and Dump".

The Parabolic move followed typical behaviors that can be seen through price action without needing any indicators. It happened in phases over 3-days, from September 25 - 27:

1. Day 1: A Peak High formed.

2. Day 1 - 2: Valley Low followed.

3. Day 2 - 3: Consolidation between the Peak High and Valley Low. Price action made stair-step moves that created a S&R Zone. Traders also refer to these moves as making multiple bases. An average number of bases is 3 - 4 during a parabolic move. The long consolidation can confuse many traders, including myself, because of no breakout from the Zone happened, especially to the downside. There was strong anticipation for a drop.

4. Day 3: A Triple Inside Day showed up to represent the tight "coiling" action from the consolidation to eventually spring out in an EXPLOSIVE move. The Triple Inside Day pattern that was part of the consolidation was a big giveaway of what's to come.

5. Day 3: A pullback from the consolidation, but was more like a fakeout to trap traders with the Trendbar Reversal, that often leads to no follow through by the bears to really drop. The second, opposing bar within the pattern is a setup for a reversal to the upside. Many traders get fooled by this pattern and drop out at this point, right before the long rally starts.

6. Day 3: Ascending Channel (also called a "Parabolic Channel") formed that is typical after a pullback to the downside before the greater ascent.

7. Day 3: Steep Vertical Ascent with a bullish bar that is 240 tics tall - an Exhaustion Phase.

8. Day 3: Reversal to the downside (that is comparable to or exceeds in length to the steep ascent) from the formation of an Evening Star. The Parabolic move ended with a steep, vertical descent.

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*Citation of Resources:
- Jet Toyco
- FX Open
- Pips 2 Profit
- Top 1 Markets