As of 05/24/2024
Indus: 39,070 +4.33 +0.0%
Trans: 15,083 +74.08 +0.5%
Utils: 926 +1.92 +0.2%
Nasdaq: 16,921 +184.76 +1.1%
S&P 500: 5,305 +36.88 +0.7%

YTD
+3.7%
5.1%
+5.0%
+12.7%
+11.2%

41,000 or 38,500 by 06/01/2024
16,050 or 15,300 by 06/01/2024
960 or 900 by 06/01/2024
17,250 or 15,850 by 06/01/2024
5,500 or 5,100 by 06/01/2024

As of 05/24/2024
Indus: 39,070 +4.33 +0.0%
Trans: 15,083 +74.08 +0.5%
Utils: 926 +1.92 +0.2%
Nasdaq: 16,921 +184.76 +1.1%
S&P 500: 5,305 +36.88 +0.7%

YTD
+3.7%
5.1%
+5.0%
+12.7%
+11.2%
 
41,000 or 38,500 by 06/01/2024
16,050 or 15,300 by 06/01/2024
960 or 900 by 06/01/2024
17,250 or 15,850 by 06/01/2024
5,500 or 5,100 by 06/01/2024
 
Statistics updated on 8/28/2020.
Identification guidelines for the bullish butterfly use Fibonacci ratios to locate the turning points. In the tests performed and discussed below, I used publicly available information to identify the Fibonacci ratios and applied them in a manner that I believe is correct. Additional guidelines may allow you to tune the performance of the chart pattern so that it makes for a better trading vehicle.
Bullish Butterfly

The above numbers are based on just over 700 perfect trades in bull markets only. See the glossary for definitions.
See the below table and associated figure.
Characteristic  Discussion 
The Bullish Butterfly Retraces

XAB  Price rises from X (see figure on the right, not drawn to scale) to peak at A and retraces 78.6% to B.  
ABC  Another retrace occurs as price rises from B to C. The Fibonacci ratios which apply are shown in the figure as CB/AB.  
BCD  The extension CD as a percentage of CB covers the ratios shown (see CD/CB).  
AD/AX  The final leg of the pattern sees price drop from peak C to valley D. The AD move measures 127% of AX. 
Trading Tactic  Explanation 
Fibonacci  Use the length of AX to help predict the price at which the stock will turn at D. AD should be 1.27 times as long as AX. 
Go long  Once price turns at D, buy the stock. Price may continue dropping below D but that happens just 9% of the time. 
Stop  If price closes below D, then exit the trade. 
Measure Rule  After price turns at D, I found price rises to A 39% of the time, to B 79% of the time, and to C 49% of the time. 
Let's take a look at a trading example.
I show the butterfly on the daily chart of LSB Industries. X has a low of 7.64, A peaks at 9.93, B has a range of 8.49 to 8.08, C has a range of 9.70 to 9.05 and D has a range of 7.80 to 7.03.
Using these numbers, the AB/AX retrace ranges from 63% to 81%, depending if you use the high or low at B. The 78.6% Fibonacci ratio rests near the high end of that range, so I consider it a valid turning point.
Similarly, the CB/AB retrace ranges between 52% and 88%, depending on the high/low value of C. Three of the Fibonacci ratios (61.8%, 70.7%, and 78.6%) are within the high/low range.
The CD/CB extension ranges between 117% and 165% (using high/low values of D), comfortably snuggling in the Fibonacci ratio of 161.8%
Lastly, the AD/AX extension measures between 93% and 127%, depending on the high/low choice of D. However, I use a 3 percentage point window (3% above or below) for this last ratio (because it's an exact match), so a Fibonacci ratio of 127% works anyway.
The stock peaks at H (the ultimate high after which price drops at least 20% or closes below the bottom of the pattern), at a price of 11.70 for a rise above D of 66%.
 Thomas Bulkowski
Support this site! Clicking any of the books (below) takes you to
Amazon.com If you buy ANYTHING while there, they pay for the referral.
Legal notice for paid links: "As an Amazon Associate I earn from qualifying purchases."
My Stock Market Books

My Novels

Butterfly is a registered trademark of Scott Carney.
Disk space: The final frontier!