Eye on Harmonic Three Drives Pattern


The Harmonic Analysis: 

The methodology that controls specific price actions for the equity connected to exact Fibonacci ratios on the chart is known as a harmonic pattern.

It has been captured from the Elliott wave's studies but day after day it started to gather its fans.

The important concept that we should know is that the destiny or rather the direction of the price can't be detected exactly but it can be speculated as well as possible.

Most of the technical analysts believe that the same historic price actions and behaviors will occur although the technical patterns are not 100% accurate as that has been historically proven.

One of the most effective analytical methods in trading is the (Harmonic analysis), which has been outlined by J.M Hurst in the early 1970s.

Note that, the amazing reputation that the harmonic analytical school has gained is essentially obtained from the efficiency, which it has proved on any time frame from intraday to the monthly charts.  

Same as many life's cyclical growth processes, the movements in the financial markets always connected to their relative Fibonacci ratios and as the harmonic patterns initially depend on the Fibonacci ratios, so that it became very famous during the past decade.

There are various harmonic formations that have taken different names such as Bat, butterfly, Gartley, Crab, AB=CD and the most attractive patterns that have a good relationship with Elliott waves studies, known as (Three drives pattern).

The aforesaid pattern can be referenced to Robert Prechter when he wrote in his book (Elliott waves principles), describing the nature of third and fifth waves.

Then, let's have a deeper look together at the three drives pattern in cases, the bullish and also the bearish market.

The bearish three drives pattern:

It offers a potential reversal point for a bullish market after forming three consecutive peaks.

Click on the image below to see the full size.  

The pattern could be formed via two connecting bearish AB=CD patterns and also can show a negative butterfly pattern when it is constructing the third drive.

The pattern defines the symmetry of the move using the projection of Fibonacci retracement. 

And if you find it complicated somehow, please click on the images below to see the full size that is describing the pattern in more details. 


A- Ratios of 113.00-127.00 and 161.8% are the most used levels forming the drives over equivalent time periods.

B-    A large gap might be a signal that the pattern is wrong and it should be reconsidered.

The bullish three drives pattern:

On the opposite side, the bullish three drives pattern offers a potential reversal point for a bearish market after forming three consecutive bottoms. 

Same conditions are seen the image below, defining the same symmetry principles.

Click on the image below to see the full size. 

My dear reader, the inquiry that could jump to our minds is; can the three drives pattern identify a reversal point in the financial market?

Share Article