ES 2/12 - About The DBW-ABW Setup

ES 1min

One of my favorite patterns combination: the Descending Broadening Wedge (DBW) followed by an Ascending Broadening Wedge (ABW).

This was the setup I've been trading for days on the hourly chart.

Briefly, this is how I trade the pattern:

I play a breakout of the DBW on the upside.

After the DBW has formed (meaning that price has broken above the 2 downtrend lines), I'll need to see a throw back to the DBW or a support line.

Then I'll draw a trendline that joins the 2 higher lows that are formed after the breakout. Next, I'll draw a trendline joining the joining the 2 peaks. This is my ABW.

Then I wait for price to hit the upper trendline. If the former breaks above the latter, I'll not chase. Only when price comes down and hit the lower trendline again (by now that would be the 3rd time price touches lower trendline) will I look for a signal to go long.

If price were to break below the lower trendline instead, I'll wait for a pull back. If during the pull back price were to pierce the lower trendline of the ABW, and close above it - that's a busted ABW. All the better. GO LONG.

My targets will be the levels where price TOUCHES the upper channel of the DBW.

I usually take profit at target 1, then wait to see what develops. If I see a partial rise, I'll abort any plans to enter another long.

A partial rise is a reliable warning of a break below the ABW, many times what comes after that is a measured move down. Good to sell short.