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
