Trading based on harmonic formations mostly depends on proper measurement of Fibonacci retracement in relation to price movements.
A description of all the patterns can be found in the article: Harmonic Trading – Most Efficient Patterns. Harmonic formations are patterns of continuation of the trend. For this reason, it is important that the movement we expect is consistent with earlier trend. The most effective is the formation, whose point D falls on significant support/resistance.
Many failed attempts of breaking D point
BAT pattern has formed at NZDJPY over two weeks ago. Ever since supply and demand achieved the balance between 82.00 – 83.10 levels. Both upward and downward movement is possible but BAT pattern gives greater chance for bears.
Falls will lead the price to 79.60 level
Bat pattern at NZDJPY is forming since January 27th, 2017. B point is at Fibonacci level 38,2%, D at 88,6% of XA. And exactly that level is currently the biggest challenge for the bulls.
Currently, two scenarios are possible. The first scenario is a decline after rebound from point D. Such movement will be the strongest from point D to point B (the target is at least 79.60 level).
However, the second scenario is to break out above mentioned D point and further upward movement. This second scenario is less likely but it also may occur. If you are looking for safe way to open short position and to set stop loss, the best point may be at 83.60 level. This is the nearest resistance and the price shouldn’t reach there without failing this BAT pattern.