The was discovered by Scott Carney in 2001. Carney maintains it is one of the most accurate patterns, and requires a smaller stop loss than most other patterns.
Key features to look out for are:
This is one of the retracement patterns (along with the ) - and is a deep retest of Support (in the case of a ) or Resistance (for a ) around the X level.
If a Bat fails - it can often "morph" into a where the D point exceeds the X point both in length of time and price.
The Bat is defined by the . of move XA as Potential Reversal Zone. The has the following qualities:
1.Move AB should be the .382 or . of move XA.
2.Move BC can be either .382 or . of move AB.
3.If the retracement of move BC is .382 of move AB, then CD should be of move BC . Consquently, if move BC is .886 of move AB, then CD should be 2.618 extension of move BC .
4.CD should be . of move XA.
For the perfect Bat , the X-A retracement would use a market price differential multiplier 0.50 while the A-B retracement would use the market price differential multiplier range of 0.50 through 0.618. Correspondingly, the B-C projection would use the market price differential multiplier of 2.0 while the X-A projection would use the market price differential multiplier of 0.886 as before. and their respective market price differential multiplier could include those values having up to 3% -/+ variance of the cited Fibonacci numbers.
In this chart for NYMEX Light Crude
1. Move AB is . of move XA.
2. Move BC is . of move AB.
3. With BC at a . , $38.80 price target, (in this case BC .5 of CD) CD can be a 2.00 extension of BC . Consquently, if move BC is .886 of move AB with BC .5 of CD, then CD should be 2.00 extension of move BC .
4. At $38.80 CD is a . of move XA
Fibonacci Number Derivations
The Fibonacci numbers utilized in Trading are directly or indirectly derived from the primary ratios 0.618 and 1.618 from the Fibonacci sequence. Although other technicians may utilize different percentage ratios, the following list comprises the only ratios that determine precise . Primary Ratios: 0.618 & 1.618 (From the Fibonacci Number Sequence).
Primary Derived Ratios: 0.786 = square root of the 0.6180.886 = fourth root of the 0.618
1.13 = inverse of the 0.886 (1/0.886)
1.27 = inverse of the 0.786 (1/0.786)
Complimentary Derived Ratios: 0.382, 0.50, 1.41, 2.0 , 2.24, 2.618, 3.14, 3.618