2005issue C111-5
Constructing volume-float channels for ABC corrections
A float box is a moving rectangle whose width is the lookback that makes cumulative volume equal a chosen float amount and whose height is the high-low range of that window. Plotting the upper and lower right-hand corners each session builds the price channel. Nested 50% and 25% lines come from smaller volume boxes, and a penetration day freezes the displayed edge so the breakout stays visible.
- Sum volume backward until it equals the floating supply, then draw a rectangle across that lookback using the high and low of the window.
- Recalculate the box every session and plot its upper and lower right-hand corners to leave float channel lines.
- Build 50% and 25% channel lines from half-float and quarter-float boxes, not from a vertical split of the full box.
- Hold the displayed box edge on a penetration day, then look for a B-wave whose volume contracts into the 50% float channel line.
This article is a construction guide for a volume-based price channel. The archive workflow sizes a float box from a lookback whose cumulative volume equals the floating supply, plots channel lines from the box corners, and holds the displayed edge when price pierces the box.
Start with float and float-turnover
Float means the shares actually available for public trading, as distinct from shares outstanding held by management. A float-turnover is any chart window in which cumulative volume equals the floating supply. Later steps reuse that window at full, half, and quarter float.
Build the float box from a moving lookback
A float box is constructed by summing volume backward until the total equals the floating supply, then drawing a rectangle across that lookback. The top and bottom of the rectangle are the highest and lowest prices in the window. The same construction applies when the target is a chosen float fraction rather than the full floating supply.
The box is recalculated every session as new volume changes how far back the window must extend. Its width is a moving lookback rather than a fixed bar count. Height remains the high-low range of whatever window the latest volume implies.
Plot the price channel from box corners
Float channel lines are created by plotting the upper and lower right-hand corners of the box each day. The plot records the tracks of earlier turnover boxes. The price channel is that pair of upper and lower tracks, including the nested half-float and quarter-float versions.
Nest half-float and quarter-float boxes
Nested 50% and 25% float channel lines are built from boxes sized to half or one-quarter of the floating supply. They are not taken as 50% or 25% of the vertical distance between the 100% float-box extremes.
Because those nested lines are volume-based, a lower 50% float channel can appear near the top or the bottom of the 100% float channel, depending on the latest volume. It need not coincide with any prior price level.
Freeze the box on a penetration day
On a day that price pierces the current box, the displayed box edge is held at the pre-breakout extreme. The penetration stays visible as a breakout signal rather than being absorbed into a taller box. That freeze is the penetration-day rule.
What a completed turnover shows
A completed float-turnover window shows that traded volume equaled the floating supply. It does not prove that every share in the float actually changed hands.
Place full-float boxes at successive stages
Placing full-float boxes at successive stages of a stock's history is used to locate accumulation at a bottom, a mid-advance change of hands, and distribution at a top.
Read nested lines as candidate support and resistance
In advancing trends, the 50% and 25% float channel lines are treated as candidate support at the bottom of corrections and as resistance at the top of retracements. Those candidate reaction levels are what this workflow means by support and resistance.
Construct the ABC sequence
An ABC construction looks for an A-wave that shows strength in price and volume, a B-wave in which volume contracts into the 50% float channel line, and a C-wave that begins as price turns back up from that line. The result is a three-swing sequence used as a falsifiable trade hypothesis: an A-wave advance, a B-wave pullback into a float channel, and a C-wave advance.
All readings on this track · 18 readings
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- 1987Constructing a price-time Fibonacci window for the ABC correction
- 1989Building entry and exit rules from pivots, channels, and abc-corrections
- 1989Constructing ABC Fibonacci expansion objectives
- 1990Calendar windows for three-wave pullbacks
- 1990Labeling wave 1, B, or X after a five-wave C
- 1991Constructing an Elliott zigzag with ABC Fibonacci checkpoints
- 2002Constructing Elliott wave ABC and triangle pattern counts
- 2003A bear-market bounce as a second wave, an RSI nonconfirmation, and an ABC relabel
- 2004A pretrade risk lockbox at Elliott ABC ends
- 2005Three-check identification of an ABC pause in an uptrend
- 2005The 61.8 percent Fibonacci line as a zigzag kill-switch
- 2005Constructing volume-float channels for ABC corrections
- 2008When monthly wave counts split, freeze the ABC and Fibonacci brackets
- 2012Fiery bull construction from sector thrust to wave count
- 2013Critiquing rigid Elliott wave ratios after computerized trading
- 2018V-wave count construction from impulse and ABC corrections
- 2018Constructing short hypotheses from completed ABC corrections