B Wave the Seminal Event, blink and you miss it and the C wave up

David Banister-

The work at my firm centers firmly around a combination of fundamentals and catalysts, and crowd behavior. Yes, it’s crucial to understand herd mentality if you want to consistently enter profitable swing trades at the right time and price.  The Seminal event is analogous to what is called “the tipping point” in a new development stage of a company.  Learning to spot the pullback during this seminal event period and pouncing is crucial to making big money in the market.

This seminal event trading pattern I often call the ABC pattern, and we are looking to get long during the “B” wave portion of that 3 wave rally.  This B wave is where you get a combination of traders taking profits from the A wave rally as it begins to fade a bit.  Along with those profit takers come the late stage buyers who chase price action and therefore often fail in their trading. They often end up stopping out as the B wave progresses, or they get margin called as the B wave decline takes hold.

If you want to become a better swing trader, learn to be patient and not chase the A wave rally. Often a tipping point development is announced and a spike rally ensues, then the buzz picks up online and traders come in and chase the top end of the A wave spike.  What you want to learn is to sit on your hands and let the gas run out of the A wave, let the B wave pullback begin… and then slowly scale into your position as traders exit out not believing the move up will hold.

Samples of this are Research in Motion, Nokia, and recently Vivus.  We played RIMM and VVUS at my firm and recommended to our subscribers during the B waves. All of those companies were in the down and out mode, sentiment was negative, but then a seminal event took place that sparked an A wave rally to the upside.  The early traders rightly take their profits quickly leaving scraps for the chasers. The chasers end up taking losses during the digestive period of the B wave consolidation, which takes many forms on a chart.  The smart money then aggressively accumulates the B wave consolidation and profits from the C wave which can be 150-260% bigger than the A wave rally. It’s where the crowd really catches on in a light bulb moment of recognition that this time things are in fact changing fundamentally for the company in question.

Learn to recognize those “seminal events” where the A wave rally takes off, avoid chasing it, then pounce and scale long on the B wave correction. Below are some samples of the ABC pattern.

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Trading the ABC Sentiment Shifts Ahead Of The Crowd-VVUS

Spotting the 3 day rest B wave for profits

VVUS-Dec 20th Updates:  We sold 1/2 at 13.25 for 11-12% gains, and held 1/2 long.  The stock is hitting 14.90 now up 25% for ATP since our original alert and we are holding long the remainder still

One of the most obvious keys to successful trading or investing is buying low and selling high. The problem being if it was that easy to pinpoint those low and high points then all traders would be batting 1000%.  What we use at my ATP service is a combination of fundamental analysis and catalyst spotting inter-twined with charting techniques.  Most of our work revolves around buying substantial dips in a strong stock, 3x ETF’s, or reversal patterns. 3x ETF’s are great for short term swings as they function almost exclusively on crowd behavioral patterns, but it also applies to individual stocks.

In all cases what traders really need to spot ahead of the masses of investors is a subtle shift in sentiment. That key pivot point where the negative sentiment whether it be short term or long term is about to run out of gas, and the bullish sentiment is going to take over and reverse the stock or ETF higher or break the position out of a base pattern.

One of the most common patterns amongst many that we use as trigger points is the ABC pattern. This is a situation where the stock or ETF recently had a strong run.  That run produced a flurry of over-optimistic sentiment and is reflected in the high spike in the stock from the prior base. We call this the “A Wave High” pivot point.  This is where many of the traders who chase short term performance come in with a bang, right near the top.

The next key component is obviously then the “B Wave” pattern.  There are many different formations for B Wave patterns, the one we will look at today is the “3 day rest” pattern.

B waves simply serve to work off the overbought sentiment of the crowd and remove the chasers who came into the trade high, at a loss. As the stock pulls back hard initially in the B Wave, stop losses are triggered by those with discipline.  However, many traders continue to buy more of the position a bit early during this crucial B Wave pattern and then later they also get stopped out.  Finally, Margin Calls are common and more stops are triggered and the B wave winds down and sentiment is horrible.

At that strategic bottoming area of the B Wave correction is where you want to start scaling long into the position for the ensuing reversal to the upside. Sometimes these are very short term trades as in 48 hours or so, and sometimes they are several weeks long depending.  Many of the B waves on daily charts are what we term a “3 Day Rest” pattern, spotting these is very profitable.

Below we have a very recent sample 3 day rest B Wave pattern in a stock my firm recommended prior to a 15% one day move a few days after we alerted it, this  being Vivus (VVUS).  This produced an 11% net gain inside of 4 trading days after a 15% one day pop C wave rally. The two charts below show the 10 day chart with the 3 day rest pattern which we scaled into, and then the C wave to the upside. Also shown is a longer term chart where you can see the pattern as well. We traded this same pattern in ANR recently for 9-11% gains inside of 48 hours as well.

Dec 20th Updates:  We sold 1/2 at 13.25 for 11-12% gains, and held 1/2 long.  The stock is hitting 14.90 now up 25% for ATP since our original alert and we are holding long the remainder still


If you’d like to learn more about trading sentiment and catalysts for profitable Swing Trading, then join us at ATP. Go to and subscribe by using coupon code AD499ATP in the coupon code field at the bottom of the sign up form. Sign up for quarterly and the discount will be applied at checkout, and you will get The Market Trend Forecast for free as well.

David Banister