Hello Fernando,

The Butterfly refers to the reversal chart pattern that belongs in the category of Harmonic patterns. It represents price consolidation and can often be spotted at the end of an extended price movement.

Traders can use this pattern to identify the end of the trending movement and prepare for the start of a correction or new trend phase. In terms of the Elliot Wave principle, the Butterfly can often be seen during the last wave (Wave 5) of the impulse sequence.