When displaying Pending (a pattern that has just met all of the ratio and filter requirements as of the current price bar) and Confirmed (a pattern that has completed its formation) patterns, horizontal reference lines will be drawn at price levels that are relevant to that particular pattern and we refer to these as zone lines. These zone lines define the Potential Reversal Zone (PRZ).
Zone lines are drawn as thin dashed lines, and the ratio and price level are displayed at the end of each line. The length of these zone lines is controlled by the Zone Bars option in the parameters dialog. The default is 20 bars in length. If you do not wish to display the zone lines then set the Zone Bars parameter to 0. The size of the text can be controlled via the Font Size option also found in the parameters dialog.
Note that the target lines (i.e., T1 and T2) are extended further than all of the other zone lines. By default all target lines are extended by an additional 10 bars, but you can adjust this in parameters dialog.
For most patterns we display the following zone lines:
Zone Line |
Description |
|---|---|
Stop |
calculated based on the exact ratios of the pattern. |
T1 |
first price target calculated based on the exact ratios of the pattern. |
T2 |
second price target calculated based on the exact ratios of the pattern. |
XA |
for M/W patterns, the XA ratio that defines the pattern. |
AC=CD |
the minimum AB=CD extension that precedes the XA. |
BC |
the minimum BC extension that precedes the XA. |
Here are some examples of the zone lines displayed for various patterns:
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Note:While several zone lines may be available for display, only those zone lines that conform to the current y-axis scaling will be drawn (i.e., to prevent overlap). |
ABCD Pattern |
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M/W Patterns
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Shark Pattern |
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For the 5-0 pattern we display the following zone lines:
At the price level defined by the 0.500 BC retracement
At the price level that would create a AB=CD leg length match.
The Stop is also displayed based on the actual pattern ratios. |
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Potential patterns follow the guidelines listed above for Confirmed/Pending patterns but we omit the target and stop levels.
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See Also:
