Reintroducing the , we thought that a geo-political context might be of added interest here, considering the reactive pressure put on in the context of the Ukraine/Russian development.
- Defining The "Simple" (i.e.: non-prime) Version:
The Pattern (or "Wolfe Patter" for short) was named by Bill , and is very similar to the pattern. Typically, Point-1 represents a structure-extreme (high or low), followed by a reactive Point-2 (typically isolated in a counter-structure level (here, at a structure low). What ensues is a narrowing of the channels, starting with Point-3 and Point-4. The importance of Point-3 is that it offers the defined alignment of the 1-3 Line whose projection should allow the trader to estimate quite precisely Point-5's residence, after price reacts from Point-4, while the 2-4 Line projects forward to narrow the geometry into a flag or .
Note that we will focus here on the simple Pattern, where a Point 5-prime (written as 5') will be ignored unless price transgresses Point-5 and demands the transposition of the 2-4 Line from Point-3 to define Point-5'. So, for the time being, we will differentiate the "simple" version from the "prime version" (or even the "second version", where Point 5" is defined by the 2-4 Line departing from Point-1 - Yes, it can get that complicated) by using this UK Oil chart, as long as price remains capped at Point-5 by the 1-3-5 Line - Time will tell.
In any case, assuming that the 1-3-5 line holds at Point-5, then Point-5 becomes the point of departure from which a trader would enter a counter-trend position and aim a price action moving downwards towards the 1-4 Line, which represents the target. In this UK Oil chart, we have added a Fib-based floor at 94.15 as a potential target, simply to illustrate how to further increase the resolution of a potential target level, since the 1-4 Line can sometimes act as a "moving" target, as price can ricochet downwards along it.
I hope this quite review of the Pattern keeps you intrigued and interested in advanced patterns. In our own little world, we have our own proprietary geometric patterns (The "Euclid", the "Janus", the "Great White" and the "Deep Shark" patterns), and we quite often use these as added geometric confirmation in our predictive analyses and forecasting.
We recommend that the trader becomes aware and at ease with advanced market geometries, simply to add a layer of added confirmation before committing to a trade.
A quick other technical note here: Price seems to have come out of a , while our predictive analysis just posted an early market reversal with a potential for a 115.00 target, nearing the estimated Point-5 in this chart ... Just saying.
TradingView.com Moderator, Alias: 4xForecaster
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Disclaimer: Forecasts, analyses and directional opinions generated herein are for educational purposes only and are not trading recommendations. We trust that you will do your own due diligence first, then seek professional advice from a licensed professional, then enter the market at your own perils - David Alcindor - TradingView.com Alias: 4xForecaster
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1 - Added momental lines in faint grey
2 - Added 4-prime (4') as the actual point of departure towards Point-5
3 - Clarification: If and when price reverses from Point-5, the target level is now the 1-4' Line, as opposed to the 1-4 line, alluded to in the initial analysis.
Here is the new chart below.