The Gartley Pattern – Part 9
In view of the preceding articles on the Gartley Pattern, it has become apparent that the definition of the “Gartley Pattern” is open to interpretation. I believe that the power of the Gartley Pattern is based on its simplicity. It should simply be a retest of a significant high or low…that’s it. Can we refine this general description with some additional tools? Absolutely! If the pattern terminates at a Fibonacci retracement, this can usually increase the chances of it working. In addition, if the pattern includes a simple ABC ZigZag Elliott Wave correction, even better.
Utilizing these two techniques, we will look for a “cluster” of projections. What do we mean by a cluster? When we draw our Fibonacci retracements and extensions, ideally we would like to see the lines of these tools land very close to each other, if not right on top of each other. However, if the lines are a substantial distance from each other, then the projections create a signal that is unclear. Only when the lines cluster close together do we have a valid signal to buy or sell.
The clustering concept at first may appear to be very subjective. It is but it isn’t. The end of the wave C projection made with the Fibonacci extension tool will give us a clue as to which one of the various Fibonacci levels the market will reverse at. If the end of wave C projection is closer to the 61.8% retracement than the other Fibonacci retracement levels, then the bias is toward a Gartley pattern completing at the 61.8% retracement. If the end of wave C projection is closer to the 78.6% retracement than the other Fibonacci retracement levels, then the bias is toward a Gartley pattern completing at the 78.6% retracement. If the end of wave C projection lands between the 61.8% and the 78.6% retracements, then the signal is unclear and there is no bias as to which level the market will reverse at. In this case, if the market clearly violates the 61.8% level and hits the 78.6% level, obviously the 78.6% would be the preferred level to buy or sell. In addition, if the end of wave C projection lands beyond the beginning of the Gartley Pattern, it is won’t be a valid Gartley Pattern.
In the next lesson we will discuss specific ways to enter a trade at the completion of a Gartley Pattern.
Ross Beck, FCSI
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