Bullish Butterfly
The Butterfly has a completion price of D where a potential price movement reversal can be expected.
The Bullish Butterfly is defined by the following Fibonacci ratios:
- Move AB is 0.786 of the upwards impulse XA
- BC can be either (Case a.) a 0.382 or (Case b.) 0.886 retracement of AB
- In Case a.:
- CD will be a retracement of 1.618 beyond B
- CD will be a retracement of 1.27 from the original impulse origin X
- In Case b.:
- CD will be a retracement of 2.618 beyond B
- CD will be a retracement of 1.618 beyond the original impulse origin X
Bearish Butterfly
At the completion point of the Bearish Butterfly pattern, we expect a potential reversal for the price to fall.
The Bearish Butterfly is defined by the following Fibonacci ratios:
- Move AB is 0.786 of the initial downwards impulse XA
- BC can be either (Case a.) a 0.382 or (Case b.) 0.886 retracement of AB
- In Case a.:
- CD will be a retracement of 1.618 above B
- CD will be a retracement of 1.27 from the original impulse origin X
- In Case b.:
- CD will be a retracement of 2.618 above B
- CD will be a retracement of 1.618 from the original impulse origin X.
Butterfly Identification with PatternSurfer
PatternSurfer scans the markets in real time for the formation of Butterfly patterns, along with the dozens of other patterns across Harmonic, Wolfe Wave and Geometric pattern families.
On arrival of a Butterfly pattern, PatternSurfer will display all coordinates, including the Actual Pattern Completion Price (D) as per the market prices, as well as the Ideal Pattern Completion Price (an exact D as per the strict Fibonacci ratio). D defines the entry point for the Butterfly pattern.
With PatternSurfer, users are also able to identify the formation of a Butterfly pattern before point D is reached. This is called an “Approaching” pattern, and traders will be made aware of the expected (Ideal) Completion Price, and the current Actual Completion Price which is approaching the Ideal D.