There are four reasons for doing so:
- Once a new recovery high has been reached, the minimum requirement for a completed w.v has been established even though the wave count may/may not show a completed five waves up.
- If w.v is still unfolding to upper targets (85.00 - 85.9250), then trade has no business below 83.875. If price drops below this support area, then wave overlap has occured. From a Elliott Wave perspective, this confirms that w.v had terminated.
- Depending on where a trader entered the market, it locks in $1000 est. profit on the long term contract.
- Placing a stop where the market tells me that I'm wrong i.e. looking for higher prices, makes sense.
As a reminder, the wave structure is now very mature i.e. the risk at this point is greater trading the upside than down. While I still expect that the upper target of 85- 85.9250 will be met, my trade plan allows the market to take me out of the trade rather than exiting at a pre-determined area. This way, should price blow by the first target, I'm still in the trade looking for more upside. Traders may want to trail their stop with any further advance in price.
Trade Summary:
- Short Term Contract- Sold @82.025
- Long Term Contract - 1 contract long from 81.45
- Protective Stop - moved to 1 tick below 83.875
- Target : 85.00 - 85.925
- Trade Management: Manage the trade on your own by trailing the stop with any further advance
Best of Trading
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