Shallow Retracement of Bullish Gartley

6-30-2013 ES D MTS

ES completed a bullish Gartley and retraced less than 50%, this considered a shallow retracement but enough for a new rotation to form.  Also pay attention how the candle formations were doji’s after the completion of the Gartley … that shows a struggle to retrace the pattern.

  • If you don’t understand harmonics, they offer an opportunity to comprehend price action (which is king), they offer targets, risk and exits
  • The harmonic pattern “Bullish Gartley” that had completion at 1553.25 (keep in mind this was an automatic target after the initial retracement from the 1525 low to the 1680 high)
  • The ideal minimum retracement target for the blue Bullish Gartley was 1601.75, price did achieve this retracement and is currently holding below what I call the GRZ (Golden Ratio Zone)
  • As long as price holds below the GRZ, the previous target of 1553.25 becomes the initial target for a support test … how price behaves there is very important in harmonic terms
  • A breakdown of 1553.25 has the PRZ (Potential Reversal Zone aka completion of a harmonic pattern) target for a larger bullish Gartley (shown in green … note – the triangles, fibs and titles of the patterns are color coded)
  • Notice how harmonics offer extended targets should the initial target fail to reverse, so the gist is if price breaks down 1553.25, the first PRZ is considered a target for a short position, but when price has completed the pattern, it is wise to protect profits, scale or exit the position.
  • A trader may have an overall bias, but a consistently successful trader is prepared to not only be wrong but have a plan if goes in other direction … that being said, a hold above the GRZ 1601.75 has the top of the GRZ as an important target at 1631.5, a hold above there increases the probability of retesting 1650, 1665.5 or 1680.
  • The right side of the chart is the Volume Profile chart, this has a composite of how many contracts trade at a certain price.  This offers an understanding of where buyers and sellers find value and where they do not.  This understanding offers an edge in preparation for rejection points, targets and chop potential.