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58 The potential reversal zone possessed three harmonic calculations that defined the set-up. The .786 ofthe XA leg was calculated at 57, which was the exact projection for the completion of the AB=CD pattem. In addition to these numbers, the 1.27 of was calculated at 56. So, the potential reversal zone was between 56 and 57. The stock reversed in this area at 56 3/8, and it rallied almost ten points the within the following two weeks. APPLIED MATEmALS (AMAT): DAILY BULLISH GARTLEY AFTER A STRONG SELL-OFH It is important to note that the stop loss in this trade was very small. The stop limit should have been placed just below point X around 54. Since the initial point at X was the low from the previous sharp decline, it represented significant support. If the stock broke past this point, it would be likely to assume that Applied Materials was breaking down and going lower. But, the stock held above this point and yielded a nice reversal.
Bearish Gartley after a Strong Rally A bearish Gartley after a strong rally is a very powerful reversal signal, as well. In my opinion, this pattem is especially significant. Essentially, a stock that cant rally to new highs after a considerable move usually indicates serious weakness. Lets look at the illustration. bearish gartley after strong rally ab = cd sell at point d! The pattem forms after a strong rally. In this set-up, point X is usually an important high for the stock. The pattem should complete in an area where several harmonic projections converge. Lets look at some examples. IBM formed a beautiful Gartley after an amazing rally. In fact, the stock rallied nearly 75% in two months. After topping out at $140 a share, the stock formed a beautiful pattem. The stock reversed after failing to break through the .786 of XA. The potential reversal zone possessed three numbers within a precise area. The most important number, the .786XA was calculated at 134 9/16. The exact AB=CD at 132 7/8 did not converge near this number and the
stock rallied strongly through this area. But, the altemate 1.27 AB=CD calculation was much closer at 136 1/4. Also, the 1.61 SBC was close to this area - calculated at 135 1/32. The stock topped out at 137 11/16. h. J 111 V IBM (IBM): DAILY BEAHSI GARTLEY AFTER STRONG RALLY 50 40 30 20 10 Although the potential reversal did not possess an exact AB=CD pattem and the stock exceeded the ,786 of XA, the pattem was very clear. This situation underscores the importance of setting your stop loss, which should have been placed just above the previous high. Due to the strong price action, IBM seemed as if it was going to rally into new highs. But, it didnt,
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