Trading Techniques  |  APR 2001

The Butterfly Setup by Rudy Teseo

Pinpoint This Pattern The Butterfly Setup There’s more than one way to use harmonic patterns to find likely buy/sell candidates. by Rudy Teseo If you’ve looked for Gartley patterns while scrolling through your charts, it’s more than likely that you’ve discovered some patterns that resemble the Gartley but slant downward rather than upward, the way that the Gartley setup does. This pattern — sort of Gartley, sort of not — is known as the butterfly. Like the Gartley, it comes in two forms, bullish and bearish. The bullish butterfly is similar to the Gartley. However, although the same ratios are used as the Gartley setup — 61.8, 78.6, 1.27, and 1.618 — they occur at different parts of the pattern. This results in a point D that is lower than point X, as can be seen in Figure 1. But I should note that this is an ideal pattern; not all ratios will match the ideal in the real world, even though the pattern is a legitimate butterfly.

by Rudy Teseo