Hartley's Harmonic Pattern "Three Movements" is a fairly well-known model in the circles of stock exchange analysts and speculators, who in solving the problem of determining trading objectives give greater preference to the means and methods of technical analysis.
Description of the "Three Movements" harmonic pattern
In empirical Elliott wave theory, the analog of this pattern is defined as a "diagonal triangle". Also, many probably know Linda Raschke's "Three Indians". In harmonic trading formats we will consider this pattern considering Fibonacci ratios.
The Fibo parameters of the classical variant of the considered harmonic pattern "Three movements" provide for such laws:
- price movements 2 and 3 should end at projections 1.2 or 1.618.
- The pullbacks of movements 1 and 2 are supposed to end at 61.8% or 78.6% from the main preceding main movement.
Unfortunately, in practice pattern "Three movements" with reference proportions is an extreme rarity. Let's move on to real market situations.
A practical example of the "Three Movements" pattern
Examining the market example of the bearish pattern "Three movements" (see Fig. 2), we can clearly see that movements 2 and 3 correspond to the values of the classical parameters. We also see a "book" pullback of the first price movement. However, the second movement correction is much smaller than it should be for this Gartley model. In the market such shallow corrections usually occur at strong trend.
There are situations (see Fig. 3) when the market forms two consecutive harmonic patterns "Three movements", which significantly strengthens the trading signal for the reversal of the local trend. This should be understood and actively used.
Harmonic pattern "Three movements" is very attractive from the point of view of prognostic value, especially if it is in the position of expected completion of movement in any direction. The formation of this pattern will practically be an excellent signal that the balance of market forces begins to change, which gives us at least a temporary consolidation for trading new volume resources for a future impulse trend movement.