Yesterday afternoon I tweeted, "Let mkt tell you this move is over by putting in 5 down. Sell against high after a 3 wave counter trend. So far we don't have either".
The 15 minute chart show above (wave labels removed) illustrates a three wave corrective structure... an expanded flat. To an elliottician, that had us looking higher as a five wave decline from 1387.50 was merely w.c of the correction.
The important lesson here is that the tip off (WARNING), that the structure was corrective and once complete new highs would eventually be made, was that the intervening wave (w.b) contained overlap. It was choppy.... not impulsive. The fact that the pattern made new highs in w.b before falling in five waves is the bull trap.
Let's take this one step further. Suppose a trader misinterpreted the larger degree pattern and viewed the decline from 1387.50 as five down and a change in the short term trend. Even then, a trader shouldn't have pulled the trigger by trading the short side because ... at the time, a case could be made that the subsequent rise from 1374 low had the personality of an impulsive wave and actually counts well as a five wave advance to 1389.25. In this case the best course of action was to wait as all trades are not created equal.
I hope you found this helpful and ...
Best of Trading
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