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47

reversal zone, as defined by the completion points, does not yield a significant profit, the reversal usually will provide some type of a bounce.

It is amazing that price action can form such pattems. A stock often acts very unusually, as it enters an area where two AB=CD pattems complete. If the set-up is valid, the reversal can be sharp. However, if the trade is not a good opportunity, the price action usually will sell-off right through the potential reversal zone. Lets look at some examples.

Just For Feet sold off over a five month period in a very consistent fashion, forming a distinct AB=CD pattem with a smaller ab=cd pattem. The stock reversed within a point of both pattems. It reversed within a 1/4 point of the smaller ab=cd pattem as well.

JUST FOR FEET (FEET): DAILY

AB=CDWITH ab=cd

22 20 IS le 14 12 10

Uolume

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lllliiilllllilllllllllilllllliiliihiilllll III

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klilk

Iliiiiiihii.iiHii

6.0 4.0



The stock reversed just below 10 and rallied over 25% during the next eight days. I think that is a pretty nice retum for just being able to do some simple calculations. Seriously, the potential reversal zone, as defined by the AB=CD pattems, suggested that the stock could reverse somewhere between 9 3/4 and 10 1/2.

The trade required a small stop loss limit to see if this AB=CD, ab=cd convergence was a valid harmonic set-up. The stop loss limit might be 1/2 of a point below the low end of the calculated zone - maybe 9 1/4 or even 9 1/8. Although this opportunity might seem too simplistic, AB=CD pattems like this occur frequently and can indicate good areas for successful trades.

I want to relate my own experience, as I bought the stock in the potential reversal zone. I saw this set-up coming together nicely. I calculated the major AB=CD at 10 1/8 and the minor ab=cd at 9 15/16. Originally, I entered my order to buy at 9 15/16. But, before the stock sold off in this area, I removed my order.

The stock hit 9 13/16ths and started to rally. I didnt believe that the stock would reverse off this area. So, I missed out on an extra 1/2 point but I still made some money. I eventually bought at 10 1/4 and picked up 2 points in a week. I stayed in the trade until the stock formed a bearish price bar. Actually, I was not very impressed with the initial bounce. The pattems were so clear that I thought the reversal would yield a sharp bounce. But, the stock lacked any significant rally and I sold my position with a small profit.

The next chart clearly illustrates the pattem. Barrick Gold formed an amazing AB=CD with a smaller ab=cd. The potential reversal zone was defined quite nicely by the convergence of four harmonic numbers and two pattems - right around 13.

The larger AB=CD was projected to complete at 13 1/2, while the smaller ab=cd was calculated to complete at 12 1/2. The 1.27 projection of and the 2.24 projection of fhe smaller be leg both were calculated at 12 7/8. With so many harmonic projections converging in this area, the set-up was very clear - buy this stock around 13. The stock reversed afi:er hitting 12 7/8.



] GOLD (ABX): DAILY

NKd Aft=CDWITH D ab=cd

0BigCharts.Mm

S 0 N 98 F H fl J J fi S 0

D 99 F H fl

i i i i i

«

I cant emphasize enough the significance of set-ups like Barrick Gold. When four numbers converged within a point the probability for a reversal was very likely. Barrick Gold reversed sharply from this area, rallying over 75% in the next few months. It is an example hke this one that truly exemphfies the harmonic qualities that stocks can possess.



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