COPYRIGHT HARMONICTRADER.COM, L.L.C. 2004

Harmonic Trading of the Financial Markets: Volume One

(Excerpt 2)

By Scott M. Carney

Library of Congress 
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(Excerpt 2)

The Bullish Bat Pattern

   The Bullish Bat pattern is defined by a B point that is less than a 0.618 retracement, preferably a 0.50 or 0.382 of the XA leg.   The bullish 0.886 retracement is critical in this set-up.  Furthermore, Bullish Bat patterns are excellent 5-point corrective structures found in well-established support levels. 

Dow Jones Industrial Average

(^DJI): Weekly

    This Bullish Bat was incredibly significant, as the reversal from this pattern marked the beginning of the 2003 rally.  This weekly chart shows three numbers that defined a tight zone in the 7400 – 7500 area.  The pattern possessed a 1.618 AB=CD pattern at 7500, while the 2.24 BC projection and the 0.886 retracement converged just under the 7400 mark.   

   This pattern was extremely significant and it was the deciding factor for my switch from a 2 ½ year bearish position on the index on my website, HarmonicTrader.com.  The sharp reversal from this Potential Reversal Zone (PRZ) and the distinct structure clearly indicated the strength of this pattern. 

  This chart of the price action in the Potential Reversal Zone (PRZ) shows the sharp reversal from the completion of this pattern.  It is important to note that the 0.886 retracement at 7400 was the defining limit in the Potential Reversal Zone (PRZ).  In fact, the Dow Jones Industrial Average reversed almost exactly from this retracement. 

   The alternate 1.618AB=CD complimented the other numbers in the PRZ and this situation underscores the extremity of the Bullish Bat as a powerful 5-point corrective structure.