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2012issue C0454-59

Treat a four-leg Fibonacci completion as an unpaid hypothesis

Archive notes specify Gartley, bat, butterfly, and crab structures by stacked Fibonacci ratios and treat point D as a projected band. A 14-period relative strength index is offered as a separate state filter. Editorial view: neither the band nor the oscillator reading is a forecast until the scan reports nonmatches, population size, and whether a delayed turn after tagging D still counts.

  • Four-leg XABCD structures labeled Gartley, bat, butterfly, or crab are specified by chosen Fibonacci ratios on successive swings, not by visual resemblance alone.
  • Completion at point D is a band of projected prices. Clustered independent projections bound the potential reversal zone.
  • A reported match count does not establish robustness unless the nonmatch count and the searched population size are also stated.
  • A 14-period 70/30 relative strength index is a second, separable state filter, not a restatement of the geometric scan.
Entries in this reading3 entries
Current trackPattern recognition48 readingsFibonacci retracement97 readingsRelative Strength Index186 readings

Four-leg completions start as ratio rules

Four-leg XABCD structures labeled Gartley, bat, butterfly, or crab are specified by chosen Fibonacci ratios on successive swings rather than by visual resemblance alone. Fibonacci retracement means scaling a completed price swing by sequence ratios such as 0.382, 0.618, or 0.786 to locate a later pullback or extension. Each later swing is obtained by scaling a prior price change by Fibonacci coefficients such as 0.382, 0.618, or 0.886.

An editorial reading treats that stacked ratio rule as an unpaid hypothesis, not as a finished forecast.

Point D is a band, not a print

Completion at point D is specified as a band of projected prices, not a single print. A Gartley structure is a four-leg XABCD geometry whose completion is defined by stacked Fibonacci conditions, often including an equal AB and CD swing. One typical Gartley band stacks that AB-CD equality with a 0.786 retracement of XA and a 1.414 extension of BC.

Clustering of several independent Fibonacci projections is treated as a stronger reversal hypothesis, with the outer projections bounding the completion zone. That band is the potential reversal zone: the price band formed by the highest and lowest Fibonacci projections that mark where a four-leg structure is said to complete.

Three Gartley projections that form the QQQ completion band

The three stacked Fibonacci prints for point D sit inside a band only a few tenths of a dollar wide, so the completion is a zone rather than one fill. Dollar figures come from the blue price tags on the daily QQQ Harmonic Analyzer screenshot dated 20 October 2011.
The three stacked Fibonacci prints for point D sit inside a band only a few tenths of a dollar wide, so the completion is a zone rather than one fill. Dollar figures come from the blue price tags on the daily QQQ Harmonic Analyzer screenshot dated 20 October 2011.QQQ · Daily

The 1.414-of-BC tag is clipped at the screenshot edge, so that print is given only to the two decimals still visible. The candlestick path has no priced vertical axis and was not recovered.

A scan is incomplete without misses

Pattern recognition, in this setting, means scanning ordered bars for named multi-swing geometries and judging those hits only against the full search population, including nonmatches. A reported match count does not establish robustness unless the corresponding nonmatch count and the searched population size are also stated.

A validation rule must say whether a delayed turn, after price only tags the D ratio, still counts as a completed reversal. Editorial view: without those three disclosures the geometric hit remains unpaid.

Relative strength is a second test

A 14-period relative strength index using 70 as overbought and 30 as oversold is proposed as a separate state filter on the same reversal setups. Relative strength index is a bounded oscillator on a fixed lookback of closes, commonly read at 70 and 30 for overbought and oversold states. Those overbought-oversold extremes are used as a second witness that a Fibonacci completion is occurring away from mid-range conditions.

Because the geometric scan is built independently of the oscillator, adding 14-period 70/30 relative-strength logic is a second, separable test rather than a restatement of the same signal. The described pattern-plus-indicator workflow offered no automated backtest of Gartley, bat, or butterfly combinations.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
22 of 25 in the Pattern recognition track
201416-23 pp.Next on Pattern recognitionHidden three-channel regression signals for stock and call option entriesEach channel is defined by lookback length in days, the slope of the best-fit regression line, and a width percent that must enclose every close inside that window.
All readings on this track · 25 readings
  1. 1986Construct a decision procedure that revises itself
  2. 1989Finish the volume checklist before scoring the breakout
  3. 1989Constructing supervised forecasts on moving averages
  4. 1991Candlestick labels as stacked construction tests
  5. 1992Walk-forward evaluation of weekly price-change patterns
  6. 1993RSI price pattern templates and open interest
  7. 1994Constructing a dual-net day-ahead index direction forecast
  8. 1994A clocked stochastic second crest with a window-high stop
  9. 1996Volatility-ratio, inside-day and narrow-range-4 entry construction
  10. 1998Sliding-window correlation for cup-and-handle construction
  11. 2000Constructing rectangles for breakout hypotheses
  12. 2001Turning one candle into a ranked numeric object
  13. 2002Fuzzy-scored chart patterns as testable rules
  14. 2002From hot-zones to an open-close-matrix
  15. 2003Volume pressure and a band-clearing breakout case
  16. 2004Evaluating chart patterns against price objectives
  17. 2004Cobweb turning points from price structure
  18. 2005Hybrid decision trees and pattern recognition for trend rules
  19. 2005Two-bar zone codes for testable pattern systems
  20. 2005Price bar pattern construction and next-bar frequency
  21. 2008Observe markets before following pattern or system rules
  22. 2012Treat a four-leg Fibonacci completion as an unpaid hypothesis
  23. 2014Hidden three-channel regression signals for stock and call option entries
  24. 2014A shared daily-chart-level framework for session trades and swing holds
  25. 2015Condensed candlestick signatures
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