The Bearish Black Swan pattern has been identified on the EUR/USD, 4-hour chart. This pattern suggests a potential reversal movement from bullish to bearish if the formation criteria are fully met. The use of Fibonacci levels (both retracement and projection) can guide entry points, stop loss placement, and profit targets. Point D, around 1.120–1.121, marks a key area for potential sell entries, with support at 1.104 and targets at 1.124, 1.140, and even 1.151 for a larger extension.
The pattern formed appears to follow a structure of an upward movement followed by a subsequent correction. This sequence of moves suggests a potential harmonic pattern formation for either continuation or reversal, depending on the current price position.
Bearish Black Swan harmonic pattern
Key Points
- Point A (lowest point): Marks the beginning of the pattern formation, indicating the start of an upward move.
- Point D (highest point): Represents the highest projection point, where the completed pattern could indicate a reversal.
Fibonacci Levels – Retracement and Projection
Fibonacci Retracement (A-D)
Fibonacci levels can be used to measure potential support or resistance areas as the price corrects after reaching Point D.
- 38.2% of A-D: This level is found around 1.104–1.106. It is an initial support zone where the price may pause if a correction occurs.
- 50% of A-D: Near 1.109, this is another important level where the price might correct before determining its direction.
- 61.8% of A-D: This crucial level is around 1.094, a strong support zone where a complete reversal may be confirmed.
Fibonacci Projection (A-D)
Fibonacci projections help predict potential price targets if the move continues after reaching Point D.
- 61.8% of A-D: This level is projected near 1.124, which also coincides with the resistance level identified on the chart. This makes it an ideal short-term target.
- 100% of A-D: This level is close to 1.140, representing a more ambitious price target if the price breaks through the first target.
- 1.272% of A-D: The level around 1.151 would be the most distant target for a full extension, indicating a possible conclusion to the move.
Trading Strategy
Entry:
- Point D as Entry: The reversal or correction may be anticipated from Point D. Point D (around 1.120–1.121) can serve as a potential sell zone for traders looking to confirm a reversal pattern from bullish to bearish.
Stop Loss:
- Below Fibonacci Support: A conservative stop loss can be placed below the 61.8% Fibonacci retracement level of A-D, which is around 1.094. Alternatively, for those seeking more controlled risk, the stop loss can be positioned just below 1.104 (38.2% retracement).
Targets:
- First Target (61.8% Projection): An initial target can be set around 1.124 (61.8% Fibonacci projection of A-D), which is also an identified resistance area.
- Second Target (100% Projection): A longer-term target would be around 1.140, where the full move may conclude.
- Third Target (1.272 Projection): For those seeking a more extended move, the 1.151 level would be the maximum projection target, suggesting a stronger movement in the pair.
