One of the most unique but powerful harmonic patterns appeared on Ethereum’s chart during the early New York session. Harmonic patterns, in conjunction with other forms of analysis, can provide powerful reversal zones.
The bullish cypher
While all harmonic patterns are from HM Gartley’s original work, not all patterns are from Mr. Gartley’s work. In fact, Mr. Gartley never labeled the patterns. What he did was create a foundation on which others could continue his work. Perhaps the best known and most accomplished researcher and expert on harmonic patterns is Scott M. Carney. He is credited with discovering many harmonic patterns used today (Bat, Alternate Bat, Shark). The cypher pattern was found by Darren Oglesbee and is one of the rarer harmonic patterns. It resembles a butterfly, but does not appear with the same frequency as the butterfly. As with all harmonic patterns, there are certain ratios that the price must meet in order for the pattern to be confirmed.
Conditions for Cypher Confirmation
- B must go back to an expansive range between 38.2% and 61.8% of XA.
- C is an extension leg and moves beyond A – but needs to move to at least 127.2%, but it is normal for it to go up to 113% – 141.4%.
- D’s PRZ (Potential Reversal Zone) is a broad area that price needs to get into. The price can range between 38.2% and 61.8%.
The above chart shows the cypher pattern on the 4-hour chart of Ethereum, but it also exists on the daily chart. Harmonious patterns alone are not enough to decide whether to take a trade long or short. Other forms of analysis are required to validate an entry. Connie Brown’s composite index on the daily chart is showing very bullish conditions. First, there is no evidence of bearish divergence or hidden bearish divergence on the daily chart. Second, the composite index line crosses both the slow and fast moving averages, indicating strong momentum on the chart. Another condition that is extremely favorable to a bullish bias is the% B levels. Notice that the% B line has fallen below the 0.2 mark, indicating a high likelihood of a downward move. Instead, we see that the price and% B have risen up, suggesting a fake move down, which is a likely bear trap. From a price action perspective, I expect Ethereum to continue to move higher due to the Cypher pattern. I’m looking for Ethereum to push the top band of the Bollinger Bands (above 0.2 on% B). If price can move into the upper Bollinger Band while the RSI stays below 65, we could predict a sustained upward move that could end the year. The forecast of a rally through 2020 is increased by the coincidence of some powerful astronomical and Gann-based time cycles. This combination of time, pattern and price is a triad of conditions that create strong new trends that are long-lasting.