3-Valleys and A River
Traditional Market Pattern
Characteristics
1. Formation:
Three valleys (lower highs and lower lows) appear in a downtrend from A to B.
The price retraces from B to C, reaching approximately 62% Fibonacci retracement of AB.
A sharp sell-off (C to D) follows, completing the AB=CD structure.
2. Bearish Trend Confirmation:
The pattern suggests a continuation of the downtrend after the retracement at C.
Once the price fails at C, the downtrend resumes towards D.
3. Key Fibonacci Levels:
C is at 62% retracement of AB (a common reversal point).
CD leg equals AB leg, confirming a harmonic AB=CD pattern.
How To Trade
1. Entry Point:
Sell at C or after price confirms a rejection from C.
Aggressive traders may enter after a trendline break near point C.
2. Stop-Loss Placement:
Above point C, ideally near the 78.6% Fibonacci retracement level of AB.
For safer trades, place stop-loss slightly higher to avoid stop hunting.
3. Take-Profit Levels:
First Target: 50% retracement of CD leg for partial profit-taking.
Second Target: Point D (completion of AB=CD pattern).
Extended Target: Fibonacci 1.272 – 1.618 extension beyond D if momentum continues.
Confirmation Factors for Better Accuracy
Bearish Candlestick Rejection at C (e.g., Shooting Star, Bearish Engulfing).
RSI or MACD Divergence indicating weakness at C.
Volume Increase during the breakdown from C to D.
Break of Support Level at B, confirming continuation.
