Definition of a Classic Trend Reversal

To Reverse an
Up Trend
to a
Down Trend
the market must make a Lower Low
and
a Lower High
AND
then turn Down from there
 Fibonacci Number Applications

1 – 2 – 3 – 5 – 8 – 13 – 21 – 34 – 55 – 89 – 144 – 233 – 377 -

Properties of the Fib numbers:

Ratios: 34/55 = 0.618 Properties:

55/89 = 0.618 Sq 1.618 = 1.272
55/144 = 0.382 Sq 0.618 = 0.786
89/233 = 0.382
Ratios We Use:
Extensions: 144/89 = 1.618
0.618 – 0.786 – 1.272 – 1.618
233/144= 1.618
Pattern 1 – part one
Bearish Pattern 161.8%
D
AB = CD 127.2%
B
100%

What to look for:

Once wave CD has reached any of these
ratios, consider selling the market:

100% : 100% = Harmonic Sell

100% : 127.2% = Extension Sell
100% : 161.8% = Extension Sell
Pattern 1 – part two
Bearish Pattern
AB = CD D

A
Theoretical Example
Bearish Pattern
AB = CD
D SELL
127.2%

B
100%

C 61.8%

A
Practical Example

D
SELL

A
Practical Example

C
A C

B
B
D
D
Pattern 3

Bearish Pattern: sell at point B

B 1.618 = SELL
127.2%
or 1.272 = SELL
X 161.8%

100%
X

A
A
What to look for:
No swing between A and B
Confluence with other swings
Practical Example
 1.27 Ext
B

A
 Murder Trial Analogy

To convict the guilty we would like more than one solid evidence

Witness The same is true of trading

Murder weapon with finger print Volume Spike
Motive Stochastic turning
Moving average crossover

In Geometry:
More than one pattern completing
 1.27 Ext
B

X
X

A
Pattern 2
Bullish Pattern
A AB = CD

100% 127.2% 161.8%

D
What to look for:
Once wave CD has reached any of these
ratios, consider buying the market:
100% : 100% = Harmonic Buy
100% : 127.2% = Extension Buy
100% : 161.8% = Extension Buy
A
C

B
D=?
 A

X
B=?
A
C

B
 A

X B=?
1