NAS100 (Nasdaq) Technical breakdown (1h) (15m)Harmonic Patterns: Gartley Pattern
The Gartley pattern, as you highlighted, is a five-point price formation. It's a powerful harmonic pattern for predicting potential market reversals.
X: The initial move or trend, establishing the directional bias.
A: First correction in the opposite direction of X, signaling a pullback.
B: This leg retraces XA, typically by 61.8%, marking a key turning point.
C: Projects from AB, often a retracement to 61.8% or 78.6% of the XA leg. This projection serves as an intermediate level before D.
D: This point completes the pattern and is a potential reversal zone, determined by the 127.2% or 161.8% extension of AB. Traders look to enter here, expecting a significant reversal.
Support and Resistance Levels
The horizontal lines represent critical price levels:
Support: Acts as a floor where price may find buying pressure and reverse upward.
Resistance: Acts as a ceiling where price may face selling pressure and reverse downward.
These levels help identify optimal entry and exit points, especially when combined with harmonic patterns like the Gartley.
Trend Lines
Diagonal trend lines connecting significant highs and lows show the overall direction of the market:
Uptrend Lines: Connecting higher lows during an upward movement, showing areas to watch for pullbacks in a bullish trend.
Downtrend Lines: Connecting lower highs during a downward movement, indicating areas of potential resistance in bearish markets.
Trend lines serve as additional confluence when assessing the validity of the Gartley pattern at point D.
Fibonacci Retracements and Extensions
Fibonacci ratios are crucial for identifying potential reversal levels:
Retracements: Used to measure corrections within the XA leg, typically at 38.2%, 50%, or 61.8%. In this case, the B and C legs are based on Fibonacci retracements of the XA leg.
Extensions: These project the next potential price move. The D point in the Gartley pattern is often identified using Fibonacci extensions (127.2% or 161.8% of the AB leg).
Annotations
UT in Phase B (D): Likely refers to an Upthrust in Phase B of Wyckoff's method, indicating a false breakout or test of resistance, suggesting a potential turning point.
Current Strong: Indicates that the prevailing trend (either bullish or bearish) has strong momentum, likely backed by volume or momentum indicators.
LPSY (Last Point of Supply): A term from Wyckoff analysis, signaling the final effort of buyers before a price decline in a distribution phase. It often indicates bearish sentiment.
Interpretation
The trader is likely using a blend of harmonic patterns, support/resistance levels, and Fibonacci analysis to find entry and exit points. The Gartley pattern helps spot potential reversals at key levels, while trend lines and Fibonacci levels offer additional validation.
Potential Trading Strategies
Long Entry Strategy:
Setup: If the price is nearing a major support level and the Gartley pattern is completing at point D, traders may look for a bullish reversal pattern to go long.
Confirmation: Price action signals such as bullish engulfing candles, pin bars, or divergence on indicators (like RSI) can confirm the reversal at point D.
Targets: Fibonacci retracement levels (38.2%, 50%, or 61.8% of the AD move) serve as potential profit targets.
Short Entry Strategy:
Setup: If the price is nearing a resistance level and the Gartley pattern is completing at point D, traders may look for bearish reversal signals to enter short.
Confirmation: Look for price action patterns (like a shooting star or bearish divergence) near point D to confirm the setup.
Targets: Again, use Fibonacci retracement levels (38.2%, 50%, or 61.8% of the last move) as exit targets.
