What Is a Butterfly Pattern?
The butterfly pattern is a reversal pattern with four legs. It can indicate a bullish or bearish market, which will depend on how the pattern looks like. Through the bullish butterfly pattern target, you’ll know when a price action is reaching its end.
What Is Bullish Butterfly Pattern?
As the name implies, the bullish butterfly pattern indicates an uptrend in the market. It starts as a downtrend but gradually works its way up and down until forming a bullish pattern.
More so, the bullish butterfly harmonic pattern lets you know when to put a buy order. This is upon reaching the end of point D. Meanwhile, at the end of the X-A leg, you can put a stop-loss order. You can also place profit targets in points A and C, but that depends on external factors that can influence the market performance.
How to Identify a Bullish Butterfly Pattern
If you’re curious about what is a bullish pattern, you must know how to identify such. Among others, one of the things to look for is the C-D leg, which must be longer than the X-A leg. Meanwhile, in the patterns, there should be two descending highs.
Upon reaching point D, the price consolidates. This is the point where a bullish trend begins. Our Auto Harmonic Pattern Recognistion software Identifies these and many other harmonic patterns live as they occur. Also we have a special Automated completion zone, where if the D pivot finds support within, the result Bullish trade has a high probability of happening. Check out the example image below taken from the TradingView version of our xBrat Auto Harmonic Pattern Software and check it out on our website HERE
Example of a Bullish Butterfly Pattern
To give you an example of this uptrend, let’s look at the most important bullishbutterfly pattern rules:
- The X-A leg, which is the first in the four legs, is in an uptrend
- Upon reaching Point A, the price drops to Point B, which isn’t as low as Point X
- The market rallies, which brings the Point C up but lower than Point A
- In another plummet, the price drops to the Point D, which is lower than Points X and B