Circular Decomposition of Harmonic Pattern & 3:1 Long of CD Leg
The long position in XRP is merely incidental. The emphasis is on using clean line work to discover areas where price is more likely to reverse.
In this example, which includes a bearish harmonic pattern , decreasing volatility is visible to the naked eye, even without the compression of the MA ribbon or the decreasing ATR.
Some unusual arrangement of pitchforks suggests that a lower time frame trend is breaking out and may retest diagonal support. If this occurs, a long entry presents itself, which would complete the CD Leg of the pattern and set up a Short at the D point.
Trading the CD Leg is NOT recommended because it often fails the test that comes at this level; the pattern is NOT considered confirmed until reaching point D. The incidental long shown here AWAITS the resolution of the test, as suggested by the S-Curve.
Fibonacci ratios are used not only to establish a potential action space for longer range forecasts but also to measure a profit target at point D, on the 1h chart. Although less obvious, but they are used also to estimate Trend Exhaustion (diagonals) and, hence, time.
In addition to more common elements of a Volume Spread Analysis, a series of overlapping VWAPs interacts with the action space implied by the Fibonacci ratios to reveal what might be described as the "grain" in the price history. Of especial importance is how certain VWAPs anchored to real-world events (as opposed to swing highs and lows, or opening bells) predict otherwise invisible volatility when either price or other VWAPs cross them.
In this example, which includes a bearish harmonic pattern , decreasing volatility is visible to the naked eye, even without the compression of the MA ribbon or the decreasing ATR.
Some unusual arrangement of pitchforks suggests that a lower time frame trend is breaking out and may retest diagonal support. If this occurs, a long entry presents itself, which would complete the CD Leg of the pattern and set up a Short at the D point.
Trading the CD Leg is NOT recommended because it often fails the test that comes at this level; the pattern is NOT considered confirmed until reaching point D. The incidental long shown here AWAITS the resolution of the test, as suggested by the S-Curve.
Fibonacci ratios are used not only to establish a potential action space for longer range forecasts but also to measure a profit target at point D, on the 1h chart. Although less obvious, but they are used also to estimate Trend Exhaustion (diagonals) and, hence, time.
In addition to more common elements of a Volume Spread Analysis, a series of overlapping VWAPs interacts with the action space implied by the Fibonacci ratios to reveal what might be described as the "grain" in the price history. Of especial importance is how certain VWAPs anchored to real-world events (as opposed to swing highs and lows, or opening bells) predict otherwise invisible volatility when either price or other VWAPs cross them.
Adrian Dyer,
Chief Strategist and Impresario at The Leading Indicator
Chief Strategist and Impresario at The Leading Indicator