Trading based on harmonic formations largely depends on the proper measurement of the Fibonacci retracement in relation to individual price movements.

A description of all the pattern can be found in the article: Harmonic trading – the most effective patterns of the system. Harmonic patterns are usually continuation trend formations. For this reason, it is important that the movement we expect is consistent with the earlier trend. The most effective is a formation whose point D falls on significant support/resistance.

ABCD bearish formation on AUDUSD

On AUDUSD chart occured a downward harmonic formation of ABCD. It is determined by equality of the segments AB = CD, and the point D is additionally strengthened by the resistance of 0.7560. Test of the mentioned level took place on Wednesday and since than price stagnated.

AUDUSD H4, spadkowa ABCD
AUDUSD H4, bearish ABCD

At this stage we can assume two scenarios:
1) Point D will be re-tested (what is often observed in harmonic formulas). Then there will be drops towards minima of formation. The most dynamic decline will be to point B, and further movement may be much calmer and last multiple sessions. This scenario would be in line with the previous trend, where AUDUSD fell from 0.7749 to 0.7328 from March 2017.

2) The second scenario is breaking resistance at 0.7560. This would mean “spoiling” the harmonic form and in this case a strong bullish candle breaking through 0.7560 resistance should appear caused by closing Stop Loss orders of the supply side . This scenario is an alternative with lower probability, but it reminds traders of the need for defence orders.

AUDUSD D1 spadkowa ABCD
AUDUSD D1 bearish ABCD

Leave us a comment!