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54 Often, the price action will act unusually, as it enters the potential reversal zone - either clearly reversing or blowing out the area. It has been my experience that if a bearish Gartley is not going to yield a reversal, the price action will rally strongly through the potential reversal zone. Lets look at some examples. The first example of Hilton Hotels truly illustrates the framework of the pattem. The stock formed a very clear pattem that reversed significantly. HILTON HOTELS (HLT): WEEKLY BEAMSH GARTLEY 36 24 32 26 26 lA 71 20 L% 1« 14 12 Uoluuis I i&BlgCharta.cotn Sep Oct Hou Dec 98 Feb rtar> ftpr May Jun Jul Sep Oct Now 3ec 99 Feb Mar fifrr Jun Jul Rug The potential reversal zone contained three harmonic calculations that indicated a selling opportunity right around $34 a share. The most critical number, the .786 of the XA leg was calculated at 33 3/4. This area was 9945699
complemented by the 1.618 projection of , which was at 34 9/16. The AB=CD was below this area, since it was projected at 33 5/16. Although this is fairly close to the .786 of XA, the altemate 1.27 AB=CD was a better number for this set-up because it completed at 34 7/8, and it was much closer to the 1.618 of . Although it was somewhat unclear which AB=CD projection to use, the pattem clearly was indicating that the stock should be sold around 34. Hilton exceeded this area slightly, as it reversed at 35 1/2. This situation underscores the importance of a proper stop loss limit. If the stock rallied above point X, somewhere above 36, the pattem would have been invalid. So, in this set-up, you would have risked approximately two points in exchange for a potentially powerful reversal. The stock plummeted, and it lost nearly two-thirds of its total value in six months! Ive included this enlarged chart to show the clear pattem that developed. It is amazing that such a nice pattem can materialize over a nine-month period. This weekly chart is a great example to study because it illustrates the framework of the pattem incredibly well. Volume i ullxlului hilton hotels (hlt):weekly bearish gartley SBIgChait4.eoffl .lllllllllllllllilllilllll 36 35 34 33 32 31 30 29 26 27 26 25 25 20 15 10 Oct Hov Bee 98 Feb (lar Apr May Jun Jul
I wanted to include another enlarged chart of Hilton because the setup illustrates an ideal reversal so clearly. Although the stock exceeded the potential reversal zone, it never broke above the initial point at X. In fact, on the week Hilton hit this area, the stock possessed two waming signs, an extreme price range and a tail close. With such a strong move up on this week, it would have been pmdent to wait at least one price bar - a week - for a clear reversal sign, especially since it looked Hke the stock was going to blowout this harmonic area. However, on the following week the stock topped out, as evidenced by the obvious reversal bar. 1.618 @: 34 9/1 ! AB=CD@33 5/16 :1.27AB=CD@34 7/8 !.786XA@33 3/4 HILTON HOTELS (HLT): WEEKLY BEARISH GARTLEY PRICE ACTION IN THE POTENTIAL REVERSAL ZONE Volume SBigCharts.coin 3S 34 33 32 31 30 29 28 27 26 25 20 15 10 The other interesting aspect of this chart was the price action after Hilton reversed. As you can see on this chart, the stock clearly broke dovra, as it began to make lower lows and form bearish price bars in the weeks following the top. ��915292
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