Mother Nature Sees Rackspace is Going over 87 Before Spring

• Posted by Greg Harmon
• on December 19th, 2012

You read that correctly. Mother Nature is in the stock picking business. Many of you are aware of Fibonacci retracement levels and apply them to your trading. They can be found in nature in things like the seed pattern of a sunflower, or a nautilus shell. But for some those levels are also tools to use to identify Harmonic patterns. patterns which can appear in stock price action. So in essence, Mother Nature picking stock prices. Scott Carney compiled these into The Harmonic Trader, published in 1999, into a trading system known as Harmonic Trading. There are many patterns involved in this style of trading but the most basic is the AB=CD pattern, and this is what sticks out in a stripped down chart of Rackspace Hosting, $RAX.

The chart above shows the AB=CD pattern that is playing out. The move from A to B was retraced by 38.2% to C and then started back higher. This helps to identify the pattern. The natural rhythm takes over from there, to complete the pattern over price and time. The first measurement is very basic. The price movement from A to B is added to C to derive a target for D, hence the AB=CD. For Rackspace this gives a target of 87.20. Next the measurement from B to C is then extended by the reciprocal of the AB retracement by C to create a range. For Rackspace this is a 2.618 extension to 88.08. this range between 87.20 and 88.08 is referred to as the Potential Reversal Zone (PRZ). The final piece of the triangulation is the symmetry over time. The move from A to B took a little over 2 months so the target for D should be approximately the same amount of time after C was formed. All together this gives a target for a Potential Reversal between 87.20 and 88.08 around the middle of January. Stay tuned into the universe to see if this plays out.

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