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| Butterflies Larry Pesavento introduced this pattern in his excellent and super simple book called "Fibonnacci Ratios and Pattern Recognition." In my learned experience as a serious student of the markets since 1989, Fibonnacci ratios have much more apparent rather than true application in the markets. In fact, naming the book Geometric Ratios rather than Fibonnacci Ratios might have been much more accurate. However, like Elliott, Fibonnacci is a catchy name in the world of trading and much more credit is accorded this 14th century mathematician than he is really due. That notwithstanding, this book of Larry's is one of the best technical books ever written on the markets, and it is so simple in its design that it is laughable. Structural Logic does not discuss butterflies in the technical outlook, but you will often find references to these external ratio retracements: 1.272, 1.414, and 1.618. These are the ratios are used to pinpoint butterfly price targets. However, since these same ratios are also used in a myriad of other ways at Structural Logic, oftentimes just as stepping stone targets to much higher or lower levels, and as such they and are not intended to imply that a butterfly is forming. This would be a grave mistake, because butterflies are trend termination points. |