Rin on Overbalance and Measured Moves

19:26 rin: I will try to explain the different colors in the ABCD s on my charts that are all 1:1 AB=CD

19:29 rin: A move in a trend of any degree is basically motion & that will maintaing the direction until a force of sufficient strenth is applied to change the direction. Every correctice move along the path represents a maximum force that was applied at that point. The largest of the corrective moves represents the maximum counter ballance force that could be applied. Once that force is subsequently exceeded, it shows that the trend force in that degree is losing strength (exhaustion)

This link is the basic premise.

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18:15 rin: I just don't show the BC leg as I usually will be filling that back in with a red. I'll show an example right quick.

18:17 rin: This has the BC drawn by checking the BC wave button to show

18:18 rin: But in drawing it makes chart colors follow standard for type of ABCD by not showing the BC line

18:19 rin: I'll now add the overbalance for that move - the red here is the overbalance

18:23 rin: When that is exceeded, it is an alert for possible trend change, resetting a new BC leg or forming a complex abcd pattern and gets a little more complicated.

18:28 rin: This would be the next overbalance level that would have to be exceeded back through the chart bars covered in the larger abcd (mm). The target remains the mm until a corrective move is made that is larger than the BC leg

18:42 rin: On my charts, I use 3 colors that distinguish different applications of the ABCD s drawn with the formations tool

18:43 rin: The light blue are always MM targets drawn for the CD leg to be 1:1 with the AB leg

18:44 rin: The Red are always overbalance levels - 1:1 CD to AB where the AB is the largest corrective leg in the chart segment i'm looking at

18:45 rin: The Yellow are 1:1 AB = CD projections that are less significant than the blue & red in general

18:50 rin: If an overbalance has occured for a particular move - I still want to look for clues as to how far the retracement may go - this may include a mm that is extending past the previous overbalance, which would be blue, but once it is overbalanced, I look at the last move from the swing that reversed to start the swing I am looking at. That has to sound really confusing - but here is an example

18:55 rin: If this chart were to overbalance both of the 2 horiz overbalance levels shown here, it would indicate either a change in trend or a reset of a new BC corrective leg to reset the MM

18:57 rin: I'm looking for as much convergence as I can find to point out where the move down would have the best probability of at least getting some significant bounce.

18:58 rin: I'll draw the internal fib retracements, look for any developing MM patterns that may converge with the fibs & also the yellow levels i'll add here

19:02 rin: The distinguishing difference between the red & yellow is that the red is contained withing the limits of the swing I'm looking at - in this case where it is an upswing, the red are higher lows which are subsequently followed by higher highs

19:03 rin: Where as the yellow was at the conclusion of the prior down swing coming in and at the end of a move with lower highs & lower lows

19:05 rin: ok - bet that has got to be confusing - sometime after I learn snagit i'll try to put something together to better illustrate that. But the big thing is using those moves to show the fib levels that need to be focused on

19:09 rin: Fibs by themselves except on a big picture chart - other than the 786 - are awful hard to trade by themselves because you can incur a load of damage going through them until price finally gets to one it will react to. Fibs are a great tool, but they are only significant in the geometry of the overall pattern IMHO

19:24 rin:This should give some perspective of what overbalance is.

Last updated 01/27/2009