Possible Butterfly/CautionCAUTION/PLEASE READ
SBUX is down after weaker than expected earnings . This pattern pulled a few cents past the 1.27 so far, but can pull all the way down to the 1.618, if either bottom holds, it would be trading in a butterfly pattern and a stop can be placed somewhere safely under D. The next few trading days may give some insight as to which fib level this will hit.
The Butterfly pattern is a reversal pattern composed of four legs. It is also considered and extension pattern as D is below X. The first leg is labeled XA and is a leg up in a bullish butterfly pattern. The 2nd leg is marked AG and is a retracement of XA and should reach the .786 or very close. The final leg is CD and this should land between the 1.272 (also the 1.618 of AB), so this could fall further and still be considered a butterfly . The butterfly differs from the Bat and the Gartley patterns in several ways and the final leg is an extension of XA and not a retracement of XA. he BC leg is a rally up which needs to be at least to the .382 but peak 2 needs to be lower than peak 1.
Sometimes you can get an idea about which harmonic pattern , if you are looking at a harmonic pattern , on the 2nd leg, the retracement of XA and where it retraces to. For example, the Gartley would retrace to the .618, or close. The butterfly retraces to the .786 fib level, or very close.
There is also a bearish butterfly and the 1st leg (the impulse wave) is down. The bullish butterfly looks like a crooked M and the bearish version looks like a crooked W.
D needs confirmation before a long entry, so waiting to enter can be important especially so soon after weak earnings. There can be retests of D. They missed on revenue. I do not think the China exposure is helping SBUX either so confirmation can be critical.
No recommendation.
There is psychology behind every pattern in the market. An impulse wave is the start of a new trend, be it down or up.
Fibonacci retracement tool tells us a lot of things about the price. a retracement is inversely proportional to the power in trend.
