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Mikula Forecasting
Company: Strategy #13: Gartley
Patterns
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Written by: Patrick Mikula CTA
Copyright (c)2003-06 by Patrick Mikula All Rights Reserved.
(Please to not copy or foreword this article).
Mikula Forecasting Company
P.O. Box 152672
Austin, TX 78715-2672
USA
www.MikulaForecasting.com
support@MikulaForecasting.com
====================
This article is going to discuss the Gartley
pattern. This is a complex pattern that requires four swing
pivots. On the charts below the pivots will be labeled X, A,
B and C. Each swing pivot must be near a Fibonacci
retracement level of a previous swing. The first chart below
shows a recent Bullish Gartley pattern in the Dow Jones
Industrial Average. The complete pattern took about six
month to complete. The Bullish Gartley pattern requires the
XA swing have the largest price range in the pattern. The
pivot B must be above X and pivot C must be below A. This
creates a contracting range pattern in the market. After
pivot C a forecast is made for pivot D which is created
using the formula AB=CD. The forecast using AB=CD must fall
between X and B. If the pivot D forecast made with AB=CD
does not fall between X and B the pattern is not a Bullish
Gartley pattern. This creates a forecast for pivot D which
must also be near a Fibonacci retracement level of a
previous swing. The dotted lines which connect the pivots on
the chart below do not connect the actual pivots they
identify the closest Fibonacci retracement level to the
actual pivot. This shows that pivot B was very close to a
0.618 retracement level and pivot C was very close to a
0.786 retracement level. Pivot D is very close the 0.786
Fibonacci retracement level. The DJIA then turned up and
formed an upswing.
The next example shows a recent Bearish Gartley
pattern on the Dow Jones Australia Index. This is an index
for the major stocks on the Australian stock exchange. The
bearish version is this pattern is the opposite of the
bullish pattern. This pattern is forecasting the top of a
market swing where the market should fall from. The Bearish
Gartley pattern requires four pivots to form the pattern.
The pivots are labeled X, A, B and C on the chart below. The
swing XA must be the largest swing in the pattern. The pivot
B must be below X and pivot C must be above A. The forecast
pivot D using AB=CD must fall between pivots X and B. The
forecast must also be near a Fibonacci retracement of a
previous swing. The lines connecting the pivots are
identifying the closest Fibonacci retracement to the pivot.
Pivot B is near a 0.382 retracement. Pivot C is near a 0.618
retracement level and the forecast point D is near a
Fibonacci 0.618 retracement level. After pivot C this market
moved up and made a top a few days after the forecast pivot
date but very close to the forecast pivot price. This index
is currently falling from the forecast point.
The next example shows a chart of Ameren Symbol
AEE . This is a company that owns facilities for generating
electricity. This chart shows a Bullish Gartley pattern.
This pattern requires that swing XA be the largest swing in
the pattern and pivots A and C must be inside the range of
the XA swing. The forecast point D must be between the
pivots X and B. There should be a Fibonacci retracement
level near each of the pivots especially the forecast point
D. The chart below shows pivot B is near a 0.382
retracement, pivot C is near a 0.786 retracement and
forecast point D is just above a 0.618 retracement. This
market fell from point C and made a sideways bottoming
pattern around the forecast point D and then the market
moved up forming an upswing. This provided plenty of time to
watch the market turn from down to
up.
MORE:
To see more examples of this strategy read the
version of this article on the MarketWarrior
owners page.
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