This is not a true parabolic curve because as the trend accelerates the curve changes shape until it becomes vertical. It’s the vertical section of the curve which is most useful because it provides a exact date when the trend will inevitably collapse.
This type of trend line curve was first identified in the 1930’s and it was mistakenly called a parabolic curve. We continue to use the name, even though it is not an accurate description. In the 1930’s this was a rare behavior. In the last decade this curve has become increasingly common as volatility has increased in modern markets. This type of trend should not be confused with the parabolic Stop and Reverse indicator.
The third feature of the parabolic trend line centers on the candles that build the pattern. Every day a new candle is added to the right of the previous days candle. Eventually, and inevitably, a candle will move to the right of the vertical section of the parabolic trend line and signal and end to the trend. The trend has a final ending date that can be calculated in advance using the vertical section of the trend line.
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