The Law of Charts

A typical 1-2-3 high is formed at the end of an uptrending
market. Typically, prices will make a final
high (1), proceed downward to point (2) where an
upward correction begins; then proceed upward to a
point where they resume a downward movement,
thereby creating the pivot (3). There can be more than
one bar in the movement from point 1 to point 2, and
again from point 2 to point 3. There must be a full
correction before points 2 or 3 can be defined.
A number 1 high is created when a previous up-move has ended and
prices have begun to move down.
The number 1 point is identified as the last bar to have made a new
high in the most recent up-leg of the latest swing.

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