Harmonic AB=CD as a continuation pattern
Saturday, December 29, 2012
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In conjunction with different techniques of analysis, the harmonic AB=CD patterns can play a magnificent role to define the areas where the trend will continue as we will discuss in the following paragraphs.
Actually, AB=CD is one of the simplest formations that can define continuation areas inside channels as we will see, although complex patterns provide more efficient PRZ or rather potential reversal zones from where the trend will continue.
The first educational figure explains how the bullish AB=CD pattern acts as an accurate continuation pattern inside established trend channels; particularly, when its PRZ meets the lower line of the channel which is also known as a support line or rising trend line.
In conjunction with different techniques of analysis, the harmonic AB=CD patterns can play a magnificent role to define the areas where the trend will continue as we will discuss in the following paragraphs.
Actually, AB=CD is one of the simplest formations that can define continuation areas inside channels as we will see, although complex patterns provide more efficient PRZ or rather potential reversal zones from where the trend will continue.
The first educational figure explains how the bullish AB=CD pattern acts as an accurate continuation pattern inside established trend channels; particularly, when its PRZ meets the lower line of the channel which is also known as a support line or rising trend line.
The buying opportunity in the case above could be activated when we get another technical signal such as observing an overbought signal on momentum indicator.
Example
The following figure explains the bearish harmonic AB=CD continuation pattern when it is formed within a descending channel.
In the image we can see how the D levels -potential reversal zones- act as areas of downside rally resumption when the price meets Fibonacci projection level while touching the resistance line of the descending channel.
Example
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