The whole idea of these patterns is that they help people spot possible retracements of recent trends. In fact, we'll make use of other tools we've already covered - the Fibonacci retracement and extensions. Combining these wonderful tools to spot these harmonic patterns, we'll be able to distinguish possible areas for a continuation of the overall trend. There are 6 types of Harmonic Patterns. • ABCD Pattern • Three-Drive Pattern • Gartley Pattern • Crab Pattern • Bat Pattern • Butterfly Pattern For both the bullish and bearish versions of the ABCD chart pattern, the lines AB and CD are known as the legs while BC is called the correction or retracement. If you use the Fibonacci retracement tool on leg AB, the retracement BC should reach until the 0.618 level. Then, the line CD should be the 1.272 Fibonacci extension of BC. All you have to do is wait for the entire pattern to complete (reach point D) before taking any short or long positions. Oh, but if you want to be extra strict about it, here are a couple more rules for a valid ABCD pattern: The length of line AB should be equal to the length of line CD.
Chart Analysis
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