YHOO is currently in between opposing emerging harmonic patterns, and with Tuesday’s push above 38.94, the PRZ (Potential Reversal Zone aka a harmonic pattern’s completion zone) target is 40.16 to complete a Bearish Gartley.  Sometimes, not always, but sometimes an opportunity for both opposing harmonic patterns can play out, this is one of those opportunities.

The day chart shows the March 4, 2014 candle was a gap up and closed just .53 away from completing the Gartley at 40.16.  So the key is to watch how price behaves at the 40.16 level and where does the following candles close in relation to it.  It’s one thing to breach a PRZ, it’s another thing if holds beyond the PRZ.

The blue rectangle represents the GRZ (Golden Ratio Zone aka the area between 38.2% and 61.8% Fibonacci ratios), this push above the top of the GRZ 38.94 implies upside bias but be aware that the initial upside target is not far, if price is able to push through 40.16, then the upside targets are much higher, namely 41.72, 43.70 and 46.21.

A rejection of 40.16 will have the initial support test at the GRZ 38.94, this becomes an important support test because if price cannot hold above it, the probability of downside increases.  The downside bias strengthens with a break down of the bottom of the GRZ at 37.23.

So since this is one of those instances where both opposing emerging patterns could play out, let’s talk out that scenario.  The completion of the Bearish Gartley is what helped form the third of four legs in the cyan Butterfly pattern, the retracement of the Gartley helps form the final leg of the Butterfly.

To trade this, I would wait to see how price behaves at 40.16 or a drop back below 38.94.  Yes, this requires patience and allowing price to come to me.  If price rejects 40.16, my strategy is to stalk a short position because the implication is potential retracement mode and in that retracement has huge rewards if ends up completing the Butterfly at 28.97 or better yet the Crab at 25.51.  Otherwise, a hold above 40.16 offers a long opportunity but awareness that 41.72 would be a double top so that is a definite place to take some or all profits, protect profits or stalk a reversal position.  A hold above 41.72 offers an opportunity to add to an existing long position, enter a new position or reduce the risk of an existing long position, having the ideal target at 46.21 but a scaling point which is a potential rejection point in itself at 43.70.