The ABC pattern is a popular chart pattern used in technical analysis to identify potential price reversals or continuations in the market. It consists of three distinct price movements labeled A, B, and C.

1. Leg A: This is the initial move in the pattern, where the price makes a sharp movement in one direction, either up or down. This move often signifies the end of a previous trend and the start of a new one.

2. Leg B: After the initial move, the price retraces to form leg B, which goes in the opposite direction of leg A. This retracement usually corrects part of the previous move.

3. Leg C: The third leg is a continuation of the initial move in the direction of leg A. It either confirms a trend continuation or signals a reversal depending on the context.

Traders use the ABC pattern to forecast potential price targets. Once the pattern is identified, they often trade the breakout that occurs after point C. It’s particularly useful for identifying swing trades and assessing potential entry and exit points.

This pattern is versatile and can appear in various timeframes, making it a common tool in the strategies of both short-term and long-term traders.