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Mikula Forecasting
Company: Strategy #17:
Gartley Pattern 0.382
Failure
====================
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 will discuss a special version of the
Gartley pattern which often leads to a significant collapse
in a stock's price. The first step using this strategy is to
find a Bearish Gartley Pattern or a Bearish Butterfly
Pattern. The first chart below shows the stock for Analog
Devices symbol ADI. The second step using this strategy is
to watch the retracement of the BC line by the CD line. As
CD retraces the BC line look for the market to stall near
the 0.382 Fibonacci retracement. On the chart below the
market moved up from point C and stopped near the 0.382
retracement. When this happens watch for the CD swing to
fail. This means the stock price will not move up to the
AB=CD point but stops at the 0.382 retracement. When the
price falls back below the point C the pattern has failed
and it is an indication that the stock price may collapse.
The pattern must be identified before the price falls back
below point C. The pattern on the chart below would have
been identified automatically by MarketWarrior 3.1 several
bars after point C. After breaking below point C the minimum
price target is point A but the market often falls much
farther.
Our second example is just below and shows the chart
for Bennett Env. Inc. Symbol BEL The first step using this
strategy is to identify the bearish pattern. On this chart
the Bearish Butterfly pattern would have been identified
automatically by MarketWarrior3.1 several bars after point
C. The second step is to watch the market as it retraces
line BC and watch for the stock price to stall at the
Fibonacci 0.382 retracement. On this chart the market moved
up and formed a sideways movement at the 0.382 retracement.
When the pattern fails by falling back below point C it is
an indication that the stock may soon collapse. On the chart
below you can see that the stock price did have a
significant decline after the pattern failed.
The third example of this pattern failure uses the
stock for Pfizer Inc. Symbol PFE. The first step is to
locate the bearish pattern before it fails and breaks below
point C. On the chart below the Bearish Gartley Pattern
would be identified several bars after point C. This market
moved up from point C and stalled near the 0.382
retracement. When the stock stalls near the 0.382
retracement the market should be watched for the price to
fall below point C. When the price falls below point C the
pattern has failed and a price collapse may occur. After
breaking point C the minimum target is the bottom at point A
but as you can see on the chart the price has fallen well
below this.
MORE:
To see more examples of this strategy including
several markets which have just seen the pattern fail and
not yet collapsed read the version of this article on the
MarketWarrior
owners page.
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