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55

I strongly recommend that you "go to school" on this chart example. The pattem was very clear and the reversal was very ideal. These opportunities will occur in the future. If you look hard enough, I guarantee that there is a set-up as clear as this one in the stock market right now. Furthermore, by studying this example, you will know what to look for in a vahd reversal and put yourself on the right side of a very profitable opportunity.

The next chart example shows a nice bearish Gartley. Fannie Mae reversed on the day that it hit the potential reversal zone. The stock reversed after exceeding the .786 of XA by less than a point.

FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNM): DAILY

BEARISH GARTLEY

BigCharts.corri

76 74 72 70 6S 66 64

The potential reversal zone possessed three harmonic calculations. The .786 of XA was projected at 74 1/4. The 1.27 projection of was calculated at 74 15/16. The exact AB=CD completion point was projected at 73 7/8. So, the potential reversal zone was between 73 7/8 and 74 15/16.

Fannie exceeded this area very slightly by only 3/16 of a point, as the stock reversed at 75 1/8. Your stop loss in this set-up would be just above point X - maybe around 76 1/2.

The action was fairly strong on the day it hit the potential reversal zone, especially since the stock was up approximately three points. So, you probably should have waited one day. The next day signaled a potential reversal at hand, as the stock failed to continue its rally and formed a bearish candlestick. Within a few days, Fannie Mae started to break down, since it started to make lower lows. This pattem was a valid bearish signal, as the stock lost 10 points within the next few weeks.

Another example of a bearish Gartley is illustrated in the following chart of 3M Corp. The stock formed an ideal bearish Gartley that reversed almost exactly off the .786 of the XA leg. The .786 was projected at 84 15/16, and the stock reversed after hitting 85 1/16. This area was complemented by the 1,27 projection, which was calculated at 83 7/8. 3M sold off rapidly, as it lost nearly 15 points within the following month.

3M ( ): DAILY BEARISH GARTLEY

Another very harmonic element of this chart is that the stock reversed exactly off the 1.27 altemate projection of the AB=CD. Although I would have preferred an equivalent AB=CD, the altemate projection was calculated at 85 1/16 - the exact reversal point! When price action reverses off harmonic numbers exactly, the following move can be very powerful.

This is a very nice example of a bearish Gartley because the price action reversed off two of the most important numbers - the .618 and .786 retracement of XA by the AB leg and CD leg, respectively. The .618 retracement was slightly shy of the projected number but the .786 reversed almost exactly off this number. When these set-ups yield a reversal, the following price action can be quite strong.

I have enclosed an enlarged chart of the potential reversal zone that clearly shows the stock reversing off the XA projections. This is a good chart to study because it was a very nice pattem that reversed nicely off the potential reversal zone.

1.27AB=CD@851/16 1.27 @ 83 7/8

786 @ 8415/16

3M ( ): DAILY

BEAHSH GARTLEY

PRICE ACTION IN THE POTENTIAL REVERSAL ZONE

Volume I

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83 84 83 S2 31 SO 79 7S 77 76 75 74 73

SBigCharts.com

2 3 4 S 6 9 10 11 12 13 16 17 18 19 20 23 24 25 27 30 Dec 2 3 4 7 8 9 10

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