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The advantage of trading a harmonic pattern is that the structure of this pattern is very specific and the probability of price meeting the Fibonacci levels is very high.
This gives us an edge and one can trade within the waves of a harmonic pattern, expecting the waves to fulfill the Fibonacci levels.
Thus trading a harmonic pattern on larger time frames can give us some great trades.
We have been following the GBP/USD on the 4 hour and let’s have a look at the waves of the harmonic pattern.
We expected a harmonic pattern to form, when we had the first retracement “B” form precisely at the Fib 50 level (of X-A)
The wave B-C is the only wave that has variations & we generally don’t trade this wave.
We waited for price to find support at a specific level (to form C) and once it did –
We could anticipate the wave C-D, which is very specific as per the Fib ratios.
As of now, the bearish Harmonic pattern seems to have completed and we are anticipating down moves to a specific price objective (the 127.2 of A-D)
This seems to be supported by a bearish Wolfe wave, which we can identify on the same time frame.
The price objectives of the bearish harmonic pattern and the bearish Wolfe wave seem to be forming at appr. the same level…..BUT….lets not jump into the trade.
We are looking at some further confirmations and we can afford a late (but confirmed) entry into the trade, since the Risk-to-Reward ratio is pretty good.
We have to wait for price to give us some confirmations of the expected moves & till then we set our levels and watch.
I will be following up this trade, whether it fulfills the price objectives or not.
Sunil.
Hi Sunil The pattern would be bearish bat if it reached 88.6 fib retracement of XA and it’s not quite a gartley at 50% retracement on initial retracement of 50% but do you trade not quite Gartley’s ?
Hi Sunil,
Is that is possible that after Cable bearish harnonic patterns completed, price is still able to move up beyond point D.
Looks like there is a Wolfe Wave on GBPUSD? - per attached chart. Any comments?
http://s19.photobucket.com/albums/b191/NJBlade/?action=view¤t=wolfwave051409.gif
Get your trades on before price hits the red line :o)