Powerful bullish Harmonic Pattern under threat from a fakeout. Final Inner Year Gann Cycle has appeared with little follow-through.
Gann and Gartley
Two of the ‘fathers’ of technical analysis are W.D. Gann and H.M. Gartley. Out of the two, Gann has had the most influence over time-based principles and how markets respond to time. Gartley focused on the structural formation that the market creates. Both men discovered that there is a sense of repetition on the market and that those past price action behaviors can be used to profit from a market. In the image above, we can see a series of green triangles with various letters and numbers. This is known as a harmonic pattern. Harmonic Patterns are exact and specific patterns – there is no wiggle room when Harmonic Patterns are involved. Particular projections and retracements based on Fibonacci levels must be met for a Harmonic Pattern to be complete. This specific pattern, the Bullish Bat, was discovered by the leading contemporary trader and analyst of ‘Gartley’ Harmonics, Scott Carney. I believe we should be calling these patterns Carney Harmonic Patterns because Mr. Carney does almost all of the work involved with the discovery and maintenance of this field of technical analysis – and he has discovered almost all of the 'Patterns.'
To understand this pattern, we need to identify what the Bat Pattern is. First, the B wave must be less than 61.8% of XA. Ideally, B is at the 38.2% or 50% level. The projection of BC must be at least 1.618. While not discussed in this article, the AB=CD pattern that is required for this pattern is often extended. The range of C has a fairly expansive range between 38.2% and the critical 88.6%. The 88.6% Fibonacci retracement is the defining characteristic of the Bat Pattern. As such, D is the exact and precise limit of D. There are more specific factors for the most ideal bullish and bearish Bat Pattern setups, but that is for another chart at another time. While the data on this chart shows that some of the price levels have not reached their specific zones – that is unusual to this chart. The chart data on other Ethereum charts show these levels have been reached (this is a common occurrence in cryptocurrencies).
The Gann component of this chart is the existence of the final Gann Cycle of the Inner Year. The last cycle is the 315-day cycle. Gann did not write much about this cycle but only indicated that it had a high probability of ending an inner year cycle and could generate a ‘blow-off’ move. He described blow-off moves as powerful and fast countertrend moves that could often begin a new trend. The most recent big drive up in Ethereum (October 25th, 2019) occurred precisely on the 315th day from the bear market and December 14th, 2018 low of 80.60. October 25th is also the 120th day from the 2019 high back in late June. While the combination of these events can undoubtedly trigger an overwhelming bias to the upside, there needs to be follow-through – and so far, that has not happened. If we fail to see any rising prices before the middle of November, we could be visiting the $60 value area before we even see 2020.