A Trading Lesson and Set Up
Last time I posted, I depicted two possibilities for Friday's trading. They were:
#1. That we are working wave i blue of wave (iii) purple of 3 (blue). If this is the operative count, then we should see further selling in the overnight session or into the first part of Friday's trade.
#2. I also have labeled the chart for a W-X-Y, "Double Three" flat pattern that would complete around 1100.75 whereas wave W=Wave Y. This aligns well with the upper boundary of the corrective pattern. I would look for the channel to provide resistance! Should this scenario play out, I'd expect trade to turn tail quickly from today's close as trade can't go beyond 1066.25 for a regular flat correction.
As food for thought, I said that if price exceeds 1066.25, there is still another alternative labeling that would call for an expanded flat correction. Under this scenario, trade would make a new low, then retrace up beyond 1100.75.
Often when several scenarios present a greater tendency for trade in one direction you have to play it. The odds favored a decline (66%) and a 33% chance that trade would move higher. I'm not going to go over the trade but there were several ways to enter the market to the downside. Let's look at what occurred.
What we got was #1 as price traded below 1066.25. Indeed the higher percentage played out. Scenario #2 was eliminated on the break of 1066.25 but it is still to be determined if the expanded flat alternative is still in play.
The Trade
Regardless of the current wave labeling, the count suggests that trade continues up from the lows set on Friday. Current price action looks choppy and contains overlap ... a classical signature of countertrend moves. So the question to be answered it what's the hypothetical trade. We'll, if the current labeling is correct, price can't overlap 1083.75. If it did, the possibly of the expanded flat interpretation may still have some life. Traders should be looking for sell signals against critical resistance (1083.75). The ideal stop rests just above this level (1084). How one accomplishes this is determined by your trade plan with the underlying wave count confirming the completion of 3 wave up from Friday's low of 1061.75.
Best of Trading
No comments:
Post a Comment