It has been observed that the frequently occuring W and M patterns have fixed levels of retracements and projections for each leg. And it is those fixed levels which differentiate one pattern from the other. So the inventors have given different names to these patterns on the basis of the fib. levels and projections working inside a pattern.
I am starting this series from the and I 'll try to cover one pattern at the weekends.
THE X-A LEG
Strong rejection from a level (X) which takes the price to another important level of (A)
Retracement of XA leg. Point B should retrace between 38.2% to 50 % of X-A
Retracement of AB leg. Point C should retrace between 38.2% to 88.6% of A-B
1) Retracement of XA leg. Point D should retrace 88.6% of X-A; and
2) Another condition is that point D should be between 1.618%-2.618% of B-C projection.
Pattern completes at point D so it is the most important point in the pattern. If all the above conditions are valid, a reversal is expected from this point.
# Normally a buy/sell order is placed at point D, expecting some sort of reversal, and targets are placed at 38.2% and 61.8% of A-X.
# A complete reversal should not be expected at point D in any . Only the price action and other confirmations can tell us if the overall trend has reversed of not.
Luckily we dun have to draw each and every leg of the pattern by pulling our fib. tool each time. TV has a great tool which can be used to draw these patterns easily.
Hit Like/comment if this information is useful.
Trade safe, be healthy.