Scribd
Upload
413 views

Patterns: The Three Drives Pattern

The document discusses several harmonic patterns used in technical analysis: 1. The Three Drives Pattern involves symmetrical price movements with three drives that each complete at 1.27 or 1.618 Fibonacci extensions. 2. The Butterfly Pattern requires a 0.786 retracement of the XA leg at the B point and an AB=CD pattern, often with an extended 1.27 or 1.618 CD leg. 3. The AB=CD Pattern features equivalent AB and CD legs, with the C point retracing to 0.618 or 0.786 and the BC projection converging with pattern completion at 1.27 or 1.618.

Uploaded by

RABENAIVO
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
413 views

Patterns: The Three Drives Pattern

The document discusses several harmonic patterns used in technical analysis: 1. The Three Drives Pattern involves symmetrical price movements with three drives that each complete at 1.27 or 1.618 Fibonacci extensions. 2. The Butterfly Pattern requires a 0.786 retracement of the XA leg at the B point and an AB=CD pattern, often with an extended 1.27 or 1.618 CD leg. 3. The AB=CD Pattern features equivalent AB and CD legs, with the C point retracing to 0.618 or 0.786 and the BC projection converging with pattern completion at 1.27 or 1.618.

Uploaded by

RABENAIVO
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 10

PATTERNS

The Three Drives Pattern

BULLISH

BEARISH
Although it was not specifically identified, one of the first references
to a Three Drives pattern was outlined in Robert Prechter's book,
"Elliot Wave Principle." He described the general nature of price
action that possessed either a three-wave or a five-wave structure.
Adapted from this principle, symmetrical price movements that
possess identical Fibonacci projections in a 5- wave price structure
constitute a Three Drives pattern. The critical aspect of this pattern
is that each drive completes at either a 1.27 or a 1.618. Also, the
price legs should possess clear symmetry with each drive forming
over equivalent time periods.

Butterfly pattern

BULLISH

BEARISH
The structure of the Butterfly pattern was discovered by Bryce
Gilmore. In my experience, I believe an Ideal Butterfly Pattern,
which requires specific Fibonacci in the structure - including a
mandatory 0.786 retracement of the XA leg as the B point - offers
more precise Potential Reversal Zones (PRZ). Also, the Butterfly
pattern must include an AB=CD pattern to be a valid signal.
Frequently, the AB=CD pattern will possess an extended CD leg
that is 1.27 or 1.618 of the AB leg. Although this is an important
requirement for a valid trade signal, the most critical number in the
pattern is the 1.27 XA leg. The XA calculation is usually
complemented by an extreme (2.00, 2.24, 2.618) BC projection.
These numbers create a specific Potential Reversal Zone (PRZ)
that can yield powerful reversals, especially when the pattern is in
all-time (new highs/new lows) price levels.

The AB=CD pattern

BULLISH
BEARISH

The AB=CD pattern is a price structure where each price leg is


equivalent. The Fibonacci numbers in the pattern must occur at
specific points. In an ideal AB=CD, the C point must retrace to
either a 0.618 or 0.786. This retracement sets up the BC projection
that should converge at the completion of the AB=CD and be either
a 1.27 or 1.618. It is important to note that a .618 retracement at the
C point will result in a 1.618 BC projection. A .786 retracement at
the C point will result in a 1.27 projection. The most important
consideration to remember is that the BC projection should
converge closely with the completion of the AB=CD.

The Crab pattern

BULLISH
BEARISH

The Crab is a Harmonic pattern discovered by Scott Carney in


2000. This pattern is one of the most precise of all the Harmonic
patterns. The critical aspect of this pattern is the tight Potential
Reversal Zone created by the 1.618 of the XA leg and an extreme
(2.24, 2.618, 3.14, 3.618) projection of the BC leg. The pattern
requires a very small stop loss and usually provides an almost
exact reversal in the Potential Reversal Zone.
The Gartley pattern

BULLISH

BEARISH
The Gartley pattern was outlined by H.M. Gartley in his book
Profits in the Stock Market, published in 1935. Although the
pattern is named "The Gartley," the book did not discuss specific
Fibonacci retracements! It was not until "The Harmonic Trader"
was released that the specific retracements of the B point at a .618
and the D point at a .786 were assigned to the pattern. There are
others who have assigned Fibonacci retracements to this
framework. However, they use a variety of Fibonacci numbers at
the B and D points. Despite these variations, the Fibonacci
retracements that yield the most reliable reversals are the .618 at
the B point and the .786 at the D point. Furthermore, the pattern
should possess a distinct AB=CD pattern that converges in the
same area as the 0.786 XA retracement and the BC projection
(either 1.27 or 1.618). The most critical aspect of the Gartley is the
B point retracement, which must be at a 0.618 of the XA leg.

The Bat pattern

BULLISH
BEARISH

The Bat pattern is a precise harmonic pattern discovered by Scott


Carney in 2001. The pattern incorporates the 0.886XA retracement,
as the defining element in the Potential Reversal Zone (PRZ). The
B point retracement must be less than a 0.618, preferably a 0.50 or
0.382 of the XA leg. The Bat utilizes a minimum 1.618BC
projection. In addition, the AB=CD pattern within the Bat is
extended and usually requires a 1.27AB=CD calculation. It is an
incredibly accurate pattern and requires a smaller stop loss than
most patterns.
EXAMPLES

BEARISH
BULLISH

You might also like