On April 16 I tweeted, " IMO, Gold 60 min chart looks like a B wave from HOD implying another move up may be in store. Prints above 1393.8 bolster my ST conviction."
When I mentioned this in real time what I was doing at the time was building my larger degree wave counts. As you will see, the Elliott Wave Principle allows me to set expectation for further price development. Let's take a look at the process.
As you know, corrective patterns burn time and tend to have overlapping waves. If the advance off the lows is to be labeled as a corrective advance, subsequent price action needs to meet the rules and guidelines of elliott wave but also the characteristics of wave personality should be met.
The B wave, as it turns out is an interesting development due to the fact that:
1. The pullback associated with w.b of w. (b) retraced .786 of w.a and unfolded in a 3-3-5 pattern ... a dead giveaway, according to the rules and guidelines of a flat correction. If this was true then prices would fall in five waves from the w.b crest to complete w.c of the larger degree w.(b) and prints below the origin of w.a would invalidate my interpretation.
2. You'll notice that w.(b) was also a deep correction suggesting that the larger advance that began from 1321.5 would also unfold as a larger flat. If so, counting a five wave advance from w.(b) low would complete the pattern and set the stage for either of three events:
- a full retracement to new lows
- a more complex correction would develop
- prices would continue to advance proving my analysis wrong
Moving forward these are my expectations of what I am looking for. Should the market move in a manner contrary to my analysis then odds are that I am wrong.
I've placed reverse Fibonacci extensions on the chart which reflect levels that are of interest to me. While not labeled, price has already reached a point where w.(c) = w.(a) ... the most common relationship. Thus, the limits to hold onto this interpretation would lie below 1447.8.
I hope you found this lesson helpful. Let's leave it there for now. We'll pick up this lesson over the next few days to see how things turned out.
Best of Trading
======================================================================
ElliottwaveLive is not an investment advisory service or broker dealer. None of its contributors are registered investment advisors, licensed stock brokers or CTA's. The author may hold short term and long term positions in the futures, stocks and ETF's discussed herein. The author may also trade around those positions which may be in direct conflict with your positions. Complete trade disclosures of the contributor’s holdings are posted at www.elliottwavelive.blogspot.com. See Trader Disclosure.
Trade at your own risk. The blog site, Newsletter and all other information, material and content accessible from this Site (collectively, the "Content") provided herein provides the context for market analysis with respect to a market's, a security or a commodity's general position utilizing the Elliott Wave Principle. The Content contained herein are the opinion and general comments of the author and is based upon information that Mr. Sinibaldi considers reliable but neither ElliottWaveLive nor he warrants it's completeness or accuracy and it should not be relied upon as such. Mr. Sinibaldi or ElliottWaveLive (collectively, referred to as “EWL”) are not under any obligation to update or correct any content provided on this website. Any statements and or opinions are subject to change without notice. The content and comments contained herein neither purports nor intends to be, specific trading advice. It has been prepared without regard to any particular person's investment objectives, financial situation and particular needs. Information should not be considered as an offer or enticement to buy, sell or trade.
A more and comprehensive Risk Disclaimer and Disclosure Statements is available within the left margin of this blogsite.
======================================================================
Fair Disclosure Notice: I do not have a position in any of the aforementioned futures markets or securities related to this article.
Please could you explain the sentence..
ReplyDelete"Thus, the limits to hold onto this interpretation would lie below 1447.8."
Thanks for the lesson.
In general terms I personally do not like to see price extend beyond typical fib relationships between waves. It normally means I'm wrong when looking at corrective price structures. For example, the most common fib relationship for a corrective pattern is where w.(c) = w.(a). There are other relationships such as w.(c) = 1.618 w.(a). In this chart I am using w.(c)= 1.382 w.(a)relationship instead of the 1.618 extension because it is well beyond 1447.8, the point where I'm most likely to be proved wrong in my assessment of price action (see below).
DeleteAlso, when I measure a flat correction, I like to look for fib clustering to locate possible higher probability targets of a move. In this case I also used reverse fib targets. My experience with a flat is that a price may move to the 1.382- 1.5 reverse extensions. Lower probability moves to the 1.618 (1447.8) are rare but can occur. The odds are that I'm wrong in my overall interpretation beyond that price. Thus, the statement "the limits to hold onto this interpretation".
I might add, further investigation using fib retracement levels would also be of value but I didn't add those to the chart because the main focus on the commentary was to illustrate why identifying a corrective price move is so important. Knowing early on that price action resembled a B wave, I knew with a high degree of confidence that new lows would be a lower percentage play and that price should push higher given my expectations. When w.(a) was exceeded to upside, before making new lows, the odds of me being correct, at least my personal directional bias, was bolstered.
Keep in mind that using intraday time-frames is difficult. Interpretations can fall apart quickly and constantly need to be re-assessed. Hope this answer helped.