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Hi Folks,
Some more harmonic patterns formed precisely at the fib levels.
I want to discuss 2 separate patterns here, and combine the inferences to look ahead.
Price does respect the fib levels, as we shall see, but finally there is a certain amount of discretion required to look ahead.
First the Usd/Jpy -
On the daily time frame, we are looking for a completion of a bullish Gartley.
So, at present we are looking for price to go lower to complete the last leg of the pattern. Subsequently price may reverse from this level to give us a strong uptrend….but lets take things one step at a time.
Present circumstances - Technically the Usd/Jpy should weaken to 104.00 (appr.)
The other harmonic pattern is a Bearish Butterfly on the Nzd/Usd 1 hr time frame.
Due to precise nature of the fib levels, this pattern was traded intraday for longs.
As of now, the pattern has been completed, and we should be looking for reversal down.
Now logically, if the Usd/Jpy is to weaken further, its would mean that the Nzd/Usd should gain.
Hence at this stage, one of the above 2 patterns would not reach the logical conclusion.
This is where the "Trade plan" comes in.
Using personal discretion, one has to decide which pattern would have a better chance of completing.
One will come across such kind of contradictory situations quite often & I would like to make some relevant points here -
(1) Since we have seen the precise nature of the fibs, one should try & identify harmonic patterns on longer time frames & take trades within the pattern. In this way, you are not leaving anything to guesswork.
(2) In this present situation, a pattern on the daily time frame obviously has more weight age, than a pattern on the 1hr. So logically, I would be biased towards the Usd/Jpy.
(3) Lastly and the most important point - use proper money management, define the entry, exit & stop levels precisely, and take profits at the correct technical stages.
Remember, you are here to make profits, and there are no brownie points for the correct guess.
Sunil Mangwani
Hi Sunil:
Thanks a lot for posting pro-active analysis on the fx pairs.
Also, the aesthetically pleasing changes on the chart presentations are highly appreciated!
Hello Sunil
Thanks for posting this. Would you do a short term trade on USD/JPY to point D of the pattern OR would you rather wait for the pattern to complete and then take the trade.
Thanks, Linda
Hi Sunil
Wanted to share with you another strategy for entering trades on harmonic set-up. I found, during my limited testing, that the support/resistance line break (as mentioned in Rob Booker’s blog) would work really well for entering trades at break of point B.
Like in the case of kiwi, if you draw support trend line on 1 hr chart (which was tested thrice), and then drill down to 15 min chrt and draw another support trend line, and wait for the break of this line alongwith a break of point B, the trade would gain more credibility. And, then watch price action around the trend line on 1 hr chart, to decide on moving stops and/or profit levels.
Regards
su25
Hello Linda,
Since we are looking at this pattern on the daily time frame, I would look for short term trades…towards the completion of the last leg of the pattern.
But again, it does not mean that one should blindly go in for short trades. On lower time frames, I would tend to look for short trades, but again, the trades would be confirmed with some technical trigger…like a smaller harmonic pattern or a divergence etc.
Sunil Mangwani
Hi Su25,
I appreciate all your inputs & the sharing of your strategy. Support & Resistance levels are very important in any pattern & once you can identify them correctly, you can understand the underlying nature of price. Now support/resistance levels are of 2 kinds - horizontal levels & dynamic levels (trend lines). The break of any of these levels will always give further clues.
Your strategy is spot on, since you plot support & resistance trend lines & wait for price to break them for confirmation.
Let me add my technique to this. I tend to use horizontal levels for a confirmation of entry. Since the harmonic is a 5 wave pattern, I look at the mid point of this pattern (the point B) as an important level of resistance/support.
In this Nzd/Usd example, I would plot a horizontal line on the high of “B”. The break of this would indicate that price has built up enough momentum to continue to its anticipated target.
Now along with your strategy, we have 2 methods to give us confirmations, and one could always use both.
As I always say, in trading “one” idea plus “one” idea makes “eleven” and not “two” -:)
Thank you once again for your valuable contributions.
Sunil Mangwani
Dear Sunil,
I would say that the USDJPY GARTLEY has very strong possibilities to achieve point D (in daily time frame).
I think we could have found a bullish butterfly in the 4H (within the daily Gartley).
We find point X (104,99 - 30/06 at 8:00), A (107,76 - 07/07 at 12:00), B (105, 66 -11/07 at 12:00), and C (106,81 – 14/07 at 08:00).
C is placed in the 50% of AB, a little short retracement. However, since the retracement is found in a Fib level, the structure is still considered harmonic.
Another particularity of this butterfly is that with the 1,27 projection of XA (where we expect D) we find also AB*1,27. In contrast, the 1,61 BC is found quite far of D
Sunil, I would like you to tell me if this patterns exits, and whether we can use it as a confirmation of the daily Gartley since both D’s keep quite close ( 20-25 pips between them).
Thanks,
Carlos