33 Points In 27 Bars…

The pattern
is given such an innocent name, yet the wrath that it carries can be devastating…or
rewarding depending upon your ability to recognize the pattern and take action.
Today’s intraday (5 min) chart of the Nasdaq E-mini (NQ03H), decided to show
us one of these innocent little patterns. We basically had a Bearish Butterfly
complete at 1000 which is the 1.272 extension of the swing labeled XA on the
chart below. The butterfly’s presence shook this contract for a 33 point loss
over the next 27 bars. I think Muhammed Ali got it all wrong: It’s “Sting like
a Butterfly…” Anyway check it out.


Now, a common
question asked of me is how I trigger into a position when a pattern like this
completes. I like using candlesticks against Fibonacci price zones. Check out
the reversal candles we got today at the completion of the Bearish Butterfly.


If you don’t
trade the “minis” this same pattern happened on the 5 minute chart of QQQ. See
if you can find it. I write this article for a three reasons:

1) To keep
this reversal pattern in front of you because it is a high powered tool

2) Illustrate ways to use candlesticks and Fibonacci together

3) To think about the application of #1 and #2 on higher time frames. I use
this pattern on daily, weekly, and monthly charts…never taken a trade from a
“yearly” chart though.

Have a great
night!

Derrik

“…your CD-ROM
course is very helpful and very precise. I don’t have any training in Fibonacci,
but it sure helps me find good candidates to trade using your Triple Crown Strategy.
Thanks and keep up the good work!” – Wayne