Premium Members Harmonic Trading SPY Chart for 8/4/2013

8-4-2013 SPY H

SPY has reached a small hourly Bearish Crab PRZ (Potential Reversal Zone aka  Harmonic Pattern’s completion target), this PRZ is inside a daily Bearish Crab PRZ

Let’s look at the smaller pattern first, the entrance is 171.03 and the extreme of this PRZ is 171.31.  Typically the initial test of a PRZ has rejection potential (Notice there’s a wedge that has formed into the PRZ, this is another clue of rejection because typically wedges at the top of a move implies time for a breather or pullback.), how much rejection tells the story … the ideal minimum retracement target for this blue Bearish Crab is 169.65 with points of interest at 170.03 and 169.86 so failure to get to

the ideal minimum retracement target or a hold above said points of interest has high probability of retest of the PRZ, the second test still has a nice rejection probability but again, can it make it to 169.65, if not the third attempt has a high probability of failing to hold price down and implies a test of all levels inside the zone to 171.31.

Now, this is where it gets interesting … ok, more interesting if you find harmonic rotations intriguing (and I do) … A test of 171.31 is important because it’s like the last opportunity to make a u-turn for that small Bearish Crab, if price holds above 171.31, then I view that small Crab as a helper to reach the larger Crab’s PRZ … great example of how a smaller pattern works within a larger one.

So the larger pattern has the ideal target of 172.33 and the entrance is 171.12 for the PRZ.  The ideal minimum retracement target for this pattern is currently at 165.14 … a rejection of 171.31 (smaller pattern’s extreme target) is also a test of the initial target for the large Crab and the more the smaller Crab can retrace, the higher the probability of reaching the ideal minimum of the large Crab.  Notice on the chart, if the small Crab retraces 161.8% … this helps the large Crab retrace 38.2%