The “Three Hills and A Mountain” is rare, but a very reliable pattern. This pattern is similar to the “3-Drives (Bearish)” pattern. However, the “Three Hills” pattern is not of equal magnitude hills, and consists of another reversal trade in the original trend direction. The pattern also has a close relation to Elliott wave theory. The pattern supports Fibonacci retracement and extension concepts for key support and resistance areas. This pattern has two trade setups; one “short” and one “long.”

Each hill retraces to a minimum of 0.5 to 0.61 8 (Fibonacci ratio) of its height before expanding into the next hill. After completion of the “Three Hills,” a trend line is drawn in the chart below connecting the bottoms of the “Three Hills.” A close below the trend line gives a short trading opportunity. After completion of 62% of the prior range, it has another important reversal to the upside, the “Mountain” which rallies about 100% to 127% of entire hills range (AB).

Trade: The first trade occurs on the close below the trend line. The second trade occurs after completion of a 62% retracement to the downside-“AB.” The second trade is a “long” trade from “C.”

Target: The first trade target (Short) is 62% of prior swing length-“AB.” The second trade target is from the “C” level, which is 100% to 127% of “AB” to the upside.

Stop: Place the “first trade” stop above the “B” level and the “second trade” stop below the “C” level.

Trading Three Hills and A Mountain

Trading Three Hills And A Mountain

The example above shows the “Three Hills and a Mountain” pattern from the daily Silver futures chart (ZI). From July 2006 to September 2006, Silver futures traded from 10.800 to 13.300 in a “Three Hills and A Mountain” pattern. A trend line was drawn in the chart above connecting the bottom of the “Three Hills.” In September 2006, Silver futures closed below the trend line at 12.000, signaling a potential short-trade. The short trade target is set for 62% of “AB” at 10.975.

  1. After reaching level “C”at 62%, a “long” trade is triggered above the previous bar’s high at 11.500.
  2. The target is set at AB=CD range at 14.400.
  3. Place a “stop” order below level “C” at 10.970.

Trading Three Hills And A Mountain

Trading Three Hills And A Mountain Pattern

The chart above illustrates a “Three Hills and A Mountain” pattern from the NASDAQ futures (NQ) 305 tick chart. On February 22,2007, around noon, the pattern started to emerge as NQ made “Three Hills” and with Fibonacci proportionate retracements. A trend line is drawn connecting the three hills for a potential breakdown. At around 2.15 pm, NQ futures closed below the trend line and retraced to 62% of AB at level “C.”

  1. After confirming level “C” at 62% of AB, a “long” trade is entered above previous bars’ high at 1844.
  2. The target is set at “AB” length from level “C” at 1854.
  3. A “stop” order is placed below level “C” at 1840.