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Pepsi (PEP): 15-Minute

Pepsi completed this Bearish Butterfly on the following 15-minute chart (see Figure 10.5). The stock rallied sharply into the PRZ but stalled after testing all of the numbers.

image

Figure 10.5.

The reversal in this case exemplified an ideal situation, especially with the Terminal Price Bar being clearly established after testing the entire range of harmonic numbers. The chart of the price action in the Potential Reversal Zone in Figure 10.6 marks the T-bar with the arrow. The dotted line marks the top of the Terminal Price Bar, defining the price level that would negate the harmonic resistance established by the pattern. Essentially, a violation above this level would question the validity of the trade, and it could even trigger a reversal of the pattern to get long on a breakout above this area. I will cover these strategies later in this material. For now, it is important to focus on the elements that define a Terminal Price Bar and the type of reversal that should occur after it has been established.


  

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