Developed and trade marked by Tom DeMark, TD Arcs combine a percentage retracement with the time period.

Downtrend (Upside Arc)

  • Connect the most recent low to the previous highest peak.
  • Draw the Fibonacci retracement levels (38.2% and 61.8%) on this line, pivoting at the recent low price.

Uptrend (Downside Arc)

  • Connect recent high to previous lowest low
  • Draw the Fibonacci retracement levels on this line, pivoting at the recent high price

Interpretation

  • Find the highest high (A) between the current low (B) and the last time the price exceeded this low, draw a line connecting A and B.
  • Mark the .382 and .618 Fibonacci percentage reversal figures on this line and swing forward. TD Arcs are the retracement levels marked on the straight line
  • A time filter is used to test the retracement strength.

Signals

If the price retraces 38 percentage points of the previous move in less than 38% of the period that generated the last move, the price has a greater chance of retracing further to the 62% level.

The key to TD Arcs is the speed with which the first retracement level is reached and broken (or not) by the price. If the 38% level is reached and broken before the 38% Arc, there's a strong tendency for the momentum to carry the price up through the next retracement level at 62%. As the example above demonstrates, however, if this doesn't occur quickly enough (before the price reaches the 38% Arc) the momentum tends to lag, the retracement becomes exhausted, and the market once again follows the overall long-term trend.

Information provided by chartfilter.com