Stock Diamond - Technical Analysis Education

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

Downtrend (Upside Arc)

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

Uptrend (Downside Arc)

1. Connect recent high to previous lowest low
2. 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.

Further Information

See also Fibonacci arcs.