Another week begins and so too does the relentless scan for new chart patterns to talk about. Happily today we have a Gartley cluster to get the ball rolling so take a look at this:
The Gartley formation looks for clustering of two (or three sometimes) fibonacci levels. As you can see in this chart there is a 78.6% retracement of OX and a 127% extension of XA from B.
Always keep in mind that Fibonacci levels aren't support/resistance levels until they have been respected by price - so whilst it may be tempting to try and preempt the market it may damage your win:loss ratio to do so.
Traders will typically place their stop loss levels on the far side of the peak (once it's formed) and the cluster levels. The first profit target typically lies midway between point B and point X - but it doesn't have to be a hard target. Instead traders may decide to tighten and then trail their stop loss orders.
You can follow Ric and me on Twitter at RicCharts and DaveCharts respectively. Always feel free to send us questions or comments.
All the best,