Primary Derived Bullish Retracements: 0.786 and 0.886

The Primary Derived Bullish Retracements of the 0.786 and the 0.886 (see Figure 2.7) are directly derived from the 0.618 ratio. The 0.786 is the square root of the 0.618. The 0.886 is the fourth root of the 0.618 or indirectly derived as the square root of the 0.786.

Figure 2.7.

Out of these two simple Fibonacci retracements, I prefer the 0.886. I believe that the 0.786 retracement is more complementary in most pattern formations. Only in the ideal Gartley pattern is the 0.786 retracement a considerable harmonic number. The 0.886 is the most important retracement in the Bat pattern. In addition, the 0.886 is a critical number in the Deep Crab pattern, as the B point typically triggers 1.618 extensions. A bullish 0.886 retracement is usually an excellent entry technique to buy well-established support. Although the 0.786 retracement is more directly related to the 0.618, the 0.886 is a more critical number in harmonic patterns.