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 ave Principle!" "e described the general nature of price
action that possessed either a three#wave or a five#wave structure!
Adapted fro$ this principle, sy$$etrical price $ove$ents that
possess identical %ibonacci pro&ections in a '# wave price structure
constitute a Three Drives pattern! The critical aspect of this pattern
is that each drive co$pletes at either a (!)* or a (!+(,! Also, the
price legs should possess clear sy$$etry with each drive for$ing
over e-uivalent ti$e periods!
Butterfly pattern
BULLISH
BEARISH
The structure of the .utterfly pattern was discovered by .ryce
/il$ore! 0n $y e1perience, 0 believe an 0deal .utterfly Pattern,
which re-uires specific %ibonacci in the structure # including a
$andatory 2!*,+ retrace$ent of the 3A leg as the . point # offers
$ore precise Potential Reversal 4ones 5PR46! Also, the .utterfly
pattern $ust include an A.78D pattern to be a valid signal!
%re-uently, the A.78D pattern will possess an e1tended 8D leg
that is (!)* or (!+(, of the A. leg! Although this is an i$portant
re-uire$ent for a valid trade signal, the $ost critical nu$ber in the
pattern is the (!)* 3A leg! The 3A calculation is usually
co$ple$ented by an e1tre$e 5)!22, )!)9, )!+(,6 .8 pro&ection!
These nu$bers create a specific Potential Reversal 4one 5PR46
that can yield powerful reversals, especially when the pattern is in
all#ti$e 5new highs:new lows6 price levels!
The AB=CD pattern
BULLISH
BEARISH
The A.78D pattern is a price structure where each price leg is
e-uivalent! The %ibonacci nu$bers in the pattern $ust occur at
specific points! 0n an ideal A.78D, the 8 point $ust retrace to
either a 2!+(, or 2!*,+! This retrace$ent sets up the .8 pro&ection
that should converge at the co$pletion of the A.78D and be either
a (!)* or (!+(,! 0t is i$portant to note that a !+(, retrace$ent at the
8 point will result in a (!+(, .8 pro&ection! A !*,+ retrace$ent at
the 8 point will result in a (!)* pro&ection! The $ost i$portant
consideration to re$e$ber is that the .8 pro&ection should
converge closely with the co$pletion of the A.78D!
The Crab pattern
BULLISH
BEARISH
The 8rab is a "ar$onic pattern discovered by ;cott 8arney in
)222! This pattern is one of the $ost precise of all the "ar$onic
patterns! The critical aspect of this pattern is the tight Potential
Reversal 4one created by the (!+(, of the 3A leg and an e1tre$e
5)!)9, )!+(,, <!(9, <!+(,6 pro&ection of the .8 leg! The pattern
re-uires a very s$all stop loss and usually provides an al$ost
e1act reversal in the Potential Reversal 4one!
The artley pattern
BULLISH
BEARISH
The /artley pattern was outlined by "!=! /artley in his book
Profits in the Stock Market, published in (><'! Although the
pattern is na$ed "The /artley," the book did not discuss specific
%ibonacci retrace$ents? 0t was not until "The "ar$onic Trader"
was released that the specific retrace$ents of the . point at a !+(,
and the D point at a !*,+ were assigned to the pattern! There are
others who have assigned %ibonacci retrace$ents to this
fra$ework! "owever, they use a variety of %ibonacci nu$bers at
the . and D points! Despite these variations, the %ibonacci
retrace$ents that yield the $ost reliable reversals are the !+(, at
the . point and the !*,+ at the D point! %urther$ore, the pattern
should possess a distinct A.78D pattern that converges in the
sa$e area as the 2!*,+ 3A retrace$ent and the .8 pro&ection
5either (!)* or (!+(,6! The $ost critical aspect of the /artley is the
. point retrace$ent, which $ust be at a 2!+(, of the 3A leg!
The Bat pattern
BULLISH
BEARISH
The .at pattern is a precise har$onic pattern discovered by ;cott
8arney in )22(! The pattern incorporates the 2!,,+3A retrace$ent,
as the defining ele$ent in the Potential Reversal 4one 5PR46! The
. point retrace$ent $ust be less than a 2!+(,, preferably a 2!'2 or
2!<,) of the 3A leg! The .at utili@es a $ini$u$ (!+(,.8
pro&ection! 0n addition, the A.78D pattern within the .at is
e1tended and usually re-uires a (!)*A.78D calculation! 0t is an
incredibly accurate pattern and re-uires a s$aller stop loss than
$ost patterns!
E!A"PLES
BEARISH
BULLISH