AB can retrace up to 78.6% of the XA leg BC can retrace between 38.2% – 88.6% of AB CD can be an extension of 1.618% – 2.618% of BC CD can also be an extension of up to 1.272% – 1.618% of XA leg The point D is known as the PRZ or Potential Reversal Zone From Point D, a trade can be entered with stops at or above (below) the price point at D