A-B-C Pattern study

Quick case study of the United States Oil Fund ETF (USO)
I often use this simple/basic trading pattern called the ABC set up (you can call it 123).
I am not a big fan of complex chart tools you often find ; Why ? Worked long enough in the Hedge Fund industry to see how many Phds in Math failed to design "great trading system".
You often find many companies selling so called "amazing trading systems" ; forget it, save your money and spend more time just starring at charts for several months/years, then you'll notice basic set ups.
What is the ABC set up ?
It occurs this way ;
1) Have a simple moving average you see that sticks to the stock, ETF, forex .... your are following.
2) A quick "burst" above that moving average tells you that "new info" just change the price pattern ; we have a clear information inbalance (usually you'll see a gap with it). That will create your level "A".
3) When the info is digested by the usual suspects (analysts, the press, the bloggers ....), the stock/ETF will pull back to find some support level ; call it "B"
4) New info comes in ; confirms the first good info ; so now the non beleivers are really convinced the info was for real, and by fear of missing the train, they jump in, usually right above the "A" level ; that is what I call "C" ; a break out !!! usually with increased volume.
Voilà ..... was that simple ? You just saved thousands of $$$ (by not buying useless softwares)

Posted by Moise Levi at 10:19 AM
Labels: United States Oil Fund ETF (USO)
Reprinted with permission from: http://gicharts.blogspot.com/