The harmonic pattern is a bit similar to the double top, double bottom, head and shoulders we are familiar with, but compared with them, the harmonic pattern appears to be more systematic. Through the explanations in the first two issues, you should be able to understand the wonders of the "harmonic" pattern, right?

In the last issue, we explained the 5-point retracement structure [Bat] and [Gartley] in the harmonic pattern. In this issue, we will continue to share the 5-point extension structure [Butterfly Pattern] and [Crab Pattern].

Point D of the Butterfly and Crab patterns, which is the predicted reversal zone (PRZ), is different from the three patterns we have learned about before, namely, the Bat, Gartley and AB=CD. The reversal zones of the Butterfly and Crab are outside point X, while the reversal zones of the Bat and Gartley are within point X.

Without further ado, let's get straight to the point

Similarly, first understand their common structure, the meaning of each point and the determination method, and then understand their use and judgment through real cases.

1. Butterfly Form

The Butterfly Pattern is different from the Gartley and Bat. The retracement of the Butterfly point B is between 0.786 and 0.886 of XA, which is equivalent to a variant of the Gartley. Point D exceeds point X and generally falls at the 1.272-1.618 extension of XA. CD will be greater than or equal to AB, usually CD=1.27AB.

Determination of each point and stop profit and stop loss:

B: 0.786 of XA

C: [0.382, 0.886] of AB

D: XA's [1.272, 1.618], BC's 1.618, 2.618

Take profit: T1=0.382AD, T2=0.618AD

Stop loss: 1.618XA

2. Actual Case of Butterfly Pattern

Bearish [Butterfly]

In the four-hour chart of Ethereum against the US dollar, after the decline in the XA segment, it pulled back to point B of XA 0.786, then rebounded to point C of AB 0.801, and then pulled back to point D of XA 1.272, forming a big "W", forming a bearish butterfly. The take profit can be set at T1=0.382AD, T2=0.618AD, and the stop loss is set at 1.618XA.

Ethereum to US dollar four-hour chart

Amazon 4-hour chart

BTC 30-minute chart

Bullish [Butterfly]

For example, in the USD/CAD 1-hour chart, after the previous decline ended, the lowest point X was obtained, followed by an increase, a pullback, and a rebound. The pullback at point D was close to 1.618 XA, forming a large "M". Use the XABCD tool to connect the endpoints of the large "M" in sequence to obtain a bullish butterfly.

USD/CAD 1-hour chart

3. Crab Form

The main difference between Crab and Butterfly is the pullback at points B and D. The pullback of Crab at point B is not as deep as that of Butterfly, while the extension of Crab at point D is farther than that of Butterfly, at least at 1.618 of XA.

The following are the two directions of Crab: bearish and bullish

How to determine the points of the crab:

Point B: 0.382~0.618 of XA retracement

Point C: 0.382~0.886 of AB retracement

Point D: 1.618 of XA extension, 2.618~3.618 of BC extension

Take Profit and Stop Loss

The take profit can be set at point D

Stop loss can be set below point X (bullish pattern) or above it (bearish pattern)

4. Actual Case of Crab Pattern

Bearish Crab, as shown on the GBP/JPY daily chart, after a period of price gains, it began to pull back, forming a double bottom pattern, and then rose directly to the 1.618 extension of XA, forming a large "W". Connecting the points with the XABCD tool, you get a bearish crab.

GBP/JPY Daily Chart

Dogecoin 2-hour chart

US 100 CFD Daily Chart

Bullish [Crab]

As shown in the daily chart of the Shanghai Composite Index, a large "M" shape with the right leg longer than the left leg appears in the process of falling. Use the XABCD tool to connect the points to form a bullish crab shape. Point D is at the 1.618 extension of XA, which exceeds it a little bit. In the actual market, there is some error range for each point.

Shanghai Composite Index Daily Chart

Well, today’s sharing ends here. Here is a summary of today’s content. Remember to like and collect it to deepen your memory!!!

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