HOW TO TRADE BULLISH 5-0 HARMONIC CHART PATTERN
Bullish 5-0 harmonic chart pattern suggests a long entry upon completion of the pattern or confirming the D point of the pattern. This post explains the way to find or draw a Bullish 5-0 harmonic char pattern and the way to trade a Bullish 5-0 harmonic chart pattern.
How to draw or find a Bullish 5-0 harmonic chart pattern on price chart?
To draw or find a Bullish 5-0 harmonic chart pattern on price chart, first of all, we need to find the X and A points of the pattern. The X point is found at the bottom of a strong bearish trend, and the A point is found at the top of a pullback. Now we need to draw a fibonacci retracement tool from X to A to find the B point of the pattern. The B point should be within the 113%-161.8% fibonacci retracement of XA.
To find the B point without fibonacci retracement tool, we will use the formulas-
(IA) AB= (price at A point-price at X point) X 1.13
(IB) Price level at 113% of XA= (price at point A-result found from formula (IA))
(IIA) AB= (price at A point-price at X point) X 1.618
(IIB) Price level at 161.8% of XA= (price at point A-result found from formula (IIA))
In this case we can see, B point accurately satisfied the AB/XA= 1.13-1.618 condition of the pattern. See the illustration below.
In next step, we will draw a fibonacci retracement tool from A to B to find the C point. The C point should be within the 161.8%-224% fibonacci retracement of AB.
To find the C point without fibonacci retracement tool, we will use the formulas-
(IA) BC= (price at A point-price at B point) X 1.618
(IB) Price level at 161.8% of AB= (price at point B+result found from formula (IA))
(IIA) BC= (price at A point-price at B point) X 2.24
(IIB) Price level at 224% of AB= (price at point B+result found from formula (IIA))
The C point of this pattern should lie within the price levels found from formula (IB) and (IIB). This satisfies the BC/AB=1.618-2.24 condition of the pattern. Look at the following illustration.
In the final step, we will find the entry point, D point, of the bullish 5-0 harmonic chart pattern. To find the D point of the pattern, we will draw a fibonacci retracement tool from B to C. The D point should be at the 50% fibonacci retracement of BC.
To find the D point without fibonacci retracement tool, we will use the following formulas-
(IA) CD= (price at C point-price at B point) X 0.50
(IB) Price level at 50% of BC= (price at point C-result found from formula (IA))
The D point of this pattern should lie on the price level found from formula (IB). This satisfies the CD/BC=0.50 condition of the pattern. Look at the following illustration
How to trade the bullish 5-0 harmonic chart pattern?
A long entry is suggested when the D point of the pattern is confirmed. Thestop loss for the order should be placed at the lower support level. Theprofit target for the order should be placed within the 50-88.6% fibonacci retracement of CD.
The C point can also be traded, if it is the D point of a bearish shark harmonic chart pattern. The B point can be traded, if the entries are confirmed by the other technical analysis tool(s).
Thank You and Good Luck.