Beginning with a precise 0.786 B point retracement, the Butterfly encompasses a minimum AB=CD pattern with the 1.27 XA and the 1.618 BC projections as mandatory requirements to define the Potential Reversal Zone (PRZ).
• Precise 78.6% B point retracement of XA leg. • BC projection must be at least a 1.618. • Equivalent AB=CD pattern is minimum requirement, but the Alternate 1.27 AB=CDis the most common. • 1.27 XA projection most critical number in the Potential Reversal Zone (PRZ). • No 1.618 XA projection. • C point within range of 0.382–0. 886 retracement .