back start next[start] [1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [15] [16] [17] [18] [19] [20] [21] [22] [23] [24] [25] [26] [27] [28] [29] [30] [31] [32] [33] [34] [35] [36] [37] [38] [39] [40] [41] [42] [43] [44] [45] [46] [47] [48] [49] [50] [51] [52] [53] [54] [55] [56] [57] [58] [59] [60] [61] [62] [63] [64] [65] [66] [67] [68] [ 69 ] [70] [71] [72] [73] [74] [75] [76] [77] [78] [79] [80] [81] [82] [83] [84] [85] [86] [87] [88] [89] [90] [91] [92] [93] [94] [95] 69 Butterfly SummarySimilar to the Gartley, the Butterfly is a pattem that occurs frequently. However, there are several key differences that clearly define the pattem. The most important difference is the completion point of D beyond the initial starting point X. Again, the 1.27 of XA signifies a key reversal area for the completion of the pattem at point D. I consider the XA projection to be the most important number within the potential reversal zone. In addition, I recommend waiting for the price action to hit the 1.27 of the XA leg before executing a trade. If the pattem does not hit the 1.27,1 will let it go and look to the next area at the 1.618 projection.Another distinguishing element is the reversal point of B. Remember, in a Butterfly the retracement ofthe XA leg should be .786, as compared with a Gartley where the reversal at point is a .618 retracement. When the AB leg reverses off the .786 retracement of XA, I know that a potential Butterfly is "in the works." The .786 is extremely useful in identifying and validating an ideal Butterfly pattem.The 1.618 of the leg is useful in defining the completion of the Butterfly. An ideal set-up will include a 1.618 price move from the leg that converges with a 1.27 price move from the XA leg. In a 1.618 Butterfly, it is important to use the extreme projections of 2.24 or 2.618 for the leg to further clarify the potential reversal zone. Remember, the 1.618 signals a state of extreme price action. When this occurs, I will wait for this price point to be exceeded before executing a trade. However, when the price action exceeds the 1.618 point, I know that I am close to executing the trade.Another calculation that defines the potential reversal zone is the completion point of AB=CD. As I mentioned before, the Butterfly pattem often will contain a CD leg that usually becomes over-extended. Therefore, it is very important to calculate the 1.27 and 1.618 altemate projections of the AB=CD pattern. These calculations should be utilized to gauge the price action and serve to complement the more critical harmonic numbers. I do not use these altemate projections as execution points unless other significant calculations are present.The Butterfly is a very powerful pattem. The price action can be very volatile, especially in 1.618 Butterfly pattems. So, it can be advantageous to wait for reversal confirmation. Although this will delay a trade execution, valid reversals off the pattem will put you in stocks at critical tuming points that can yield substantial profits.Three-DrivesAlthough the Three Drives pattem is not as complex as the other pattems, it is as significant in determining key reversal zones. One of the most important elements of a Three Drives pattem is the symmetrical price thmsts. The Three Drives pattem should be easy to identify, as it should literally stick out at you. The creation of the first two drives should be unique to prior price action and be very distinct. After the initial two thmsts have been identified, the potential reversal zone can be easily calculated.The drives should occur at symmetrical time sequences. For example, if the time period between the first two drives is five price bars, the third drive should complete at the next fifth bar. The time periods do not have to be exact for a valid reversal signal.Although the symmetry of the price thmsts is the key to this pattern, the price action does not always reverse exactly at the Fibonacci projections. Once a stock has entered into the potential reversal zone, it is important to closely examine the price action and respect any waming signs. The Fibonacci projections will indicate the general area for the trade execution. I believe that valid reversals usually bounce shortly after hitting the Fibonacci projection at the third drive. In general, as the stock is completing third drive, the price action can be quite extreme. So, it is wise to exercise caution before executing a trade. Sometimes, it is better to wait a few price bars for signs of a clear reversal confirmation.The Three Drives pattem occurs less frequently than the other pattems. But, it is probably one of the easiest to identify. The trade execution is the most difficult aspect, since the price action can be volatile. But, it is a significant signal because reversals that occur following the completion of the pattem are usually quite strong.Bullish Three DrivesA bullish Three Drives pattem is one of the easiest pattems to identify. As a stock is selling off, the price action usually will form two distinct thmsts, which should indicate the potential for a reversal at the next thmst. Lets look at the illustration.bullish three drives: buy at 3!The pattem should form the same framework as the illustradon demonstrates. The bullish Three Drives should possess distinct thrasts that provide a clear buying opportunity at the third drive. Although this set-up seems simplistic, this pattem frequently yields significant reversals.[start] [1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [15] [16] [17] [18] [19] [20] [21] [22] [23] [24] [25] [26] [27] [28] [29] [30] [31] [32] [33] [34] [35] [36] [37] [38] [39] [40] [41] [42] [43] [44] [45] [46] [47] [48] [49] [50] [51] [52] [53] [54] [55] [56] [57] [58] [59] [60] [61] [62] [63] [64] [65] [66] [67] [68] [ 69 ] [70] [71] [72] [73] [74] [75] [76] [77] [78] [79] [80] [81] [82] [83] [84] [85] [86] [87] [88] [89] [90] [91] [92] [93] [94] [95]