Developed and trade marked by Tom DeMark, TD Arcs combine a percentage retracement with the time period.
Downtrend (Upside Arc)
Uptrend (Downside Arc)
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.
See also Fibonacci arcs.