Running these numbers will typically produce a price cluster of three
Fibonacci price relationships that overlap each other nicely. Any of these
price relationships can overlap; however, the two-step patterns that set up
the ideal situation typically have a retracement ratio of either .618 or .786
from a to b that overlaps either a 1.272 or a 1.618 extension of the move
from c to d that also overlaps a 100 percent projection of the first swing of
the zigzag, which would mean that bc = de. I believe this ideal two-step
fits the more stringent definition of a Gartley pattern. You might also see a
two-step pattern develop in the market in which de = 1.618 of the b-to-c
swing. I’ve found this to be a lot less common, so I have chosen not to
include it in the definition of what I look for in my two-step pattern setups.
After these initial price relationships have been run, there may be
additional Fibonacci price relationships that show up from other swings
on the chart. This will just add strength to the setup and identify it as an
important price decision.