INTRODUCTION

Harmonic price patterns are geometric price patterns that use mathematics and Fibonacci levels to define precise turning points. Unlike most other trading methods, Harmonic patterns attempt to predict future price movements and also how long a move will last. The first pattern was discovered by HM Gartley in 1935 and current harmonic patterns come from the work of Bryce Gilmour and Scott Carney who ascribed precise mathematical ratios to define the structures. Fibonacci ratio retracement and expansion tools are used to narrow down very precise reversal levels. It is important to note that smaller time frame patterns occur within bigger time frame patterns and non-harmonic patterns may (and likely will) exist within the context of harmonic patterns. These can be used to add confidence in the harmonic pattern or enhance entry and exit performance.

Note: Whilst the Gartley and ABCD pattern were first described in a book in 1935, and the Butterfly pattern was discovered by Bryce Gilmore, all the pattern descriptions and measurements here are as described in Scott Carney’s books on Harmonic Patterns which we consider the ‘classic’ on the subject.

Bullish 5-0 Pattern

A trend continuation pattern that provides an entry after a major reversal. The pattern starts with a downtrend which comes to exhaustion and draws zigzag like corrective movements. The BC leg is a bullish reversal that extends between 1.618 and 2.24 of the AB leg followed by a CD leg that retraces 50% of the BC leg and is equal in length to the AB leg and is the buy entry.

Bearish 5-0 Pattern

A trend continuation pattern that provides an entry after a major reversal. The pattern starts with an uptrend which comes to exhaustion and draws zigzag like corrective movements. The BC leg is a bearish reversal that extends between 1.618 and 2.24 of the AB leg followed by a CD leg that retraces 50% of the BC leg and is equal in length to the AB leg which is the sell entry.

Bullish ABCD Pattern

Bullish ABCD Pattern

A trend continuation pattern that was discovered by Gartley in 1935. The lines AB and CD are known as the legs while BC is called the correction or retracement. In an ideal ABCD pattern the two legs are equal in distance and time. The correction should ideally retrace to either a 0.618 or 0.786 which sets up a point D that is either a 1.27 or 1.618 of the BC correction. A 0.618 retracement at the C point results in a 1.618 BC projection. A 0.786 retracement at the C point results in a 1.27 projection to point D.

Bearish ABCD Pattern

Bearish ABCD Pattern

A trend continuation pattern that was discovered by Gartley in 1935. The lines AB and CD are known as the legs while BC is called the correction or retracement. In an ideal ABCD pattern the two legs are equal in distance and time. The correction should ideally retrace to either a 0.618 or 0.786 which sets up a point D that is either a 1.27 or 1.618 of the BC correction. A 0.618 retracement at the C point results in a 1.618 BC projection. A 0.786 retracement at the C point results in a 1.27 projection to point D.

Bullish alternative ABCD Pattern

Bullish Alternate ABCD Pattern

This is a variation of the standard ABCD pattern and is also core to all harmonic patterns. It provides for a CD leg that is not equal to the AB leg but still has a Fibonacci relationship to the AB leg and the BC correction. Its best use is in validating other patterns, for example the best Gartleys have an AB=CD structure but Bat or Crab patterns utilize alternate ABCD patterns. We would rarely trade an alternate ABCD pattern on its own unless it lined up with another Fibonacci structure.

Bearish alternative ABCD Pattern

Bearish Alternate ABCD Pattern

This is a variation of the standard ABCD pattern and is also core to all harmonic patterns. It provides for a CD leg that is not equal to the AB leg but still has a Fibonacci relationship to the AB leg and the BC correction. Its best use is in validating other patterns, for example the best Gartleys have an AB=CD structure but Bat or Crab patterns utilize alternate ABCD patterns. We would rarely trade an alternate ABCD pattern on its own unless it lined up with another Fibonacci structure.

Bullish Bat Pattern

Bullish Bat Pattern

A bullish bat pattern starts with a strong XA leg higher followed by two wave correction lower which terminates at the 0.886 Fibonacci retracement of the XA leg. The point B retracement is to the 0.50 or 0.382 and less than a 0.618. The CD leg is extended and usually 1.27 of the AB leg. Bat patterns often retrace hard.

Bearish Bat Pattern

Bearish Bat Pattern

A bearish bat pattern starts with a strong XA leg lower followed by two wave correction higher which terminates at the 0.886 Fibonacci retracement of the XA leg. The point B retracement is to the 0.50 or 0.382 and less than a 0.618. The CD leg is extended and usually 1.27 of the AB leg. Bat patterns often retrace hard.

Bullish Alternate Bat Pattern

Bullish Alternate Bat Pattern

A bullish alternate bat pattern starts with a strong XA leg higher followed by a leg lower to the 0.382 retracement, a BC leg bounce, then an extended CD leg lower that exceeds X starting point. The CD leg terminates at 1.13 of the XA leg. Point D is at least 2.0 and up to 3.16 of BC. The length of the CD leg is usually 1.618 the length of AB leg (an alternate ABCD).

Bearish Alternate Bat Pattern

Bearish Alternate Bat Pattern

A bearish alternate bat pattern starts with a strong XA leg lower followed by a leg higher to the 0.382 retracement, a BC leg dip, then an extended CD leg higher that exceeds X starting point. The CD leg terminates at 1.13 of the XA leg. Point D is at least 2.0 and up to 3.16 of BC. The length of the CD leg is usually 1.618 the length of AB leg (an alternate ABCD).

Bullish Butterfly Pattern

Bullish Butterfly Pattern

A bullish butterfly pattern starts with a strong XA leg higher followed by a leg lower to the 0.786 retracement, a BC leg bounce, then an extended CD leg lower that exceeds X starting point. The CD leg usually terminates at 1.27 of the XA leg but sometimes it is 1.618 of XA. CD is usually 1.618 of AB (sometimes 1.272) and must be an ABCD or alternate ABCD to be valid. Gartleys that fail as reversal patterns usually continue to Butterfly patterns before reversing.

Bearish Butterfly Pattern

Bearish Butterfly Pattern

A bearish butterfly pattern starts with a strong XA leg lower followed by a leg higher to the 0.786 retracement, a BC leg lower, then an extended CD leg higher that exceeds X starting point. The CD leg usually terminates at 1.27 of the XA leg but sometimes it is 1.618 of XA. CD is usually 1.618 of AB (sometimes 1.272) and must be an ABCD or alternate ABCD to be valid. Gartleys that fail as reversal patterns usually continue to Butterfly patterns before reversing.

Bullish Crab Pattern

Bullish Crab Pattern

The crab pattern is another pattern where the reversal point D is beyond the X start point of the pattern. In a bullish crab a bullish reversal is retraced between 0.382 to 0.618, followed by a bounce BC and then a CD that is a 161.8% extension of the XA leg and is also a 224% – 316% extension of the AB leg. This pattern uses a very tight reversal zone and a smaller stop loss.

Bearish Crab Pattern

Bearish Crab Pattern

The crab pattern is another pattern where the reversal point D is beyond the X start point of the pattern. In a bearish crab a bearish reversal is retraced between 0.382 to 0.618, followed by a dip BC and then a CD that is a 161.8% extension of the XA leg and is also a 224% – 316% extension of the AB leg. This pattern uses a very tight reversal zone and a smaller stop loss.

Bullish Deep Crab Pattern

Bullish Deep Crab Pattern

The deep crab uses the 0.886 retracement at the B point (unlike the regular crab that that utilizes a 0.382-0.618). The deep crab distinguishing feature is point D is at the 1.618 of the XA leg which lines up with an extreme (2.24, 2.618, 3.14, 3.618) projection of the BC leg. A correct deep crab has a small reversal zone, requires a smaller stop and is usually volatile in the reversal zone.

Bearish Deep Crab Pattern

Bearish Deep Crab Pattern

The deep crab uses the 0.886 retracement at the B point (unlike the regular crab that that utilizes a 0.382-0.618). The deep crab distinguishing feature is point D is at the 1.618 of the XA leg which lines up with an extreme (2.24, 2.618, 3.14, 3.618) projection of the BC leg. A correct deep crab has a small reversal zone, requires a smaller stop and is usually volatile in the reversal zone.

Bullish Gartley Pattern

Bullish Gartley Pattern

The Gartley is a trend continuation pattern first identified in 1935. The best Gartley patterns have a clear ABCD pattern, a point B that terminates at 0.618 of the XA leg, a point D that terminates at the 0.786 of the XA leg and point D is a 1.272 or 1.618 projection of the BC correction.

Bearish Gartley Pattern

Bearish Gartley Pattern

The Gartley is a trend continuation pattern first identified in 1935. The best Gartley patterns have a clear ABCD pattern, a point B that terminates at 0.618 of the XA leg, a point D that terminates at the 0.786 of the XA leg and point D is a 1.272 or 1.618 projection of the BC correction.

Bullish Shark Pattern

Bullish Shark Pattern

This new pattern is designed to identify a trend change rather than a retracement entry to an existing trend following a failed impulse AB wave. It is similar to a 5-0 pattern but without the D leg and constraints. The Point C reversal zone entry point is either at 0.886 or 1.13 of the 0-X initial leg. This pattern requires management, it is usually volatile and the first target for the trade is the 50% retrace of the BC leg which is the 5-0 entry point.

Bearish Shark Pattern

Bearish Shark Pattern

This new pattern is designed to identify a trend change rather than a retracement entry to an existing trend following a failed impulse AB wave. It is similar to a 5-0 pattern but without the D leg and constraints. The Point C reversal zone entry point is either at 0.886 or 1.13 of the 0-X initial leg. This pattern requires management, it is usually volatile and the first target for the trade is the 50% retrace of the BC leg which is the 5-0 entry point.

Bullish Three Drives Pattern

Bullish Three Drives Pattern

This pattern is similar to an ABCD pattern with en extra leg. As with the ABCD pattern it works well when each leg starts at a Fibonacci retracement of the previous leg, completes at a precise Fibonacci ratio projection (either 1.13, 1.27 or 1.618) and there is time and price symmetry in each of the legs.

Bearish Three Drives Pattern

Bearish Three Drives Pattern

This pattern is similar to an ABCD pattern with en extra leg. As with the ABCD pattern it works well when each leg starts at a Fibonacci retracement of the previous leg, completes at a precise Fibonacci ratio projection (either 1.13, 1.27 or 1.618) and there is time and price symmetry in each of the legs.