We appear to have completed minuette wave (iv) last night and are beginning to work minuette wave (v) down. We've appear to have already completed subminuette wave i and are near completion of subminuette wave ii. When subminuette wave iii begins, it should take us back near the $3000 level.
This wave count would be invalidated if prices rally above $3843.
If you have any thoughts or questions about this wave count or elliott wave in general, please post them in the comments.
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Where would subminuette wave 5 take us?
Given that minuette wave (iii) was greater than 1.618% of wave (i), I'm expecting that (iii) will be the longest wave in this move. Given that, if wave (v) were 0.618% of wave (iii) it would end right about the $3000 level. That is definitely where I'd look to take profits on a decline. That would actually make it a truncated 5th, since it wouldn't extend beyon wave (iii), which is legal but not very common.
Another way to look at this is that wave (i) is somewhat likely to equal wave (v) when wave (iii) is extended. That would have wave (v) truncated at the $3300 level.
Those are a few common ways to measure expected moves. I'm expecting prices to dip at least a little bit below minuette wave (iii), but the $3000 level being a psychological level, I'm not expecting prices to dip too far below it. Assuming the strong uptrend is going to resume shortly thereafter, I don't expect prices to stay in the sub-$3000 area for long.
Thanks for explaining. Why would you take profits after the completion of wave 5? Or is that in case of shorting?
Depending on your approach and the degree of waves or timeframe that you're trading, you'll typically want to start taking profits as wave 5 looks like it's nearing completion. That is true for long or short positions. In the case of short positions, I'm referring to 5 waves down in a larger degree correction.
The reason being, after wave 5 completes, you can expect a retracement of one larger degree. For example, if you went long in minor wave 1 and rode the position all the way through minor wave 5, you'd probably want to start selling as prices approached the end of wave 5, or once the larger degree correction begins. Otherwise you risk giving back much of your profits instead of carrying them on to your next trade. In such an example, if the correction were of primary degree, you risk giving back all your profits and riding the trade into a loss.
If you're new to Elliott Wave, it can be confusing to think about 5 waves moving down instead of up, but that is actually the case we're in right now. There are 5 waves down of smaller degree (minuette) in the chart above. These waves are subwaves of a larger ABC retracement which is moving down.
Really appreciate such in-depth explanations, thank you, sir! In this case I will treat the end of a minuette wave 5 as a potentially good opportunity to scale in in anticipation of a larger move up.
I have re-read your last comment: "Given that minuette wave (iii) was greater than 1.618% of wave (i), I'm expecting that (iii) will be the longest wave in this move.". Did you mean minuette wave (ii) was greater than 1.618% of wave (i)?
Yes, assuming the wave count is correct, the end of minuette wave (v) would be a good place to start to scale in to a long position.
There is one caveat however. It's possible for corrective waves to develop additional complexity. That is, it's possible that intermediate wave (2) will develop another leg once minor wave Y completes (see wxyxz patterns).
To account for additional complexity developing, it's important to always know the point where the trade is wrong and get out at that point. There are no guarantees in the market, just probabilities which may be slightly weighed in your favor ;)
No, the statement was accurate. Wave (ii) cannot be longer than wave (i) or it wouldn't be a valid wave (ii). That is, wave (ii) is not allowed to retrace more than the length of wave (i). If you ever see a count which suggests that, it's an inaccurate count as it would break a cardinal rule of EW.
I am curious about your opinion on this:
How does it fit within EW theory? Why is it possible to have an ABC correction in an "A" wave of a previous ABC correction? I understand that there are often multiple ways to apply EW counts but just want to consider all possible scenarios and their probabilities.
There are a few problems with that chart.
First, the timeframes of those waves are off. The ABC waves are labeled as intermediate waves, yet it's clear the first (A) wave took less than 5 days to complete, which is too short to be an intermediate wave since they should run weeks to months.
Second, both the first ABC and the second ABC are being labeled with intermediate degree waves which is confusing to look at. If the second ABC does contain the first they should be different degree waves.
Third and most important, it's only possible for the A wave of a flat to be a three wave move. The larger pattern here is a zig-zag in which case A must be a 5 wave move. It's possible to have 2 three wave moves as part of a larger zig zag, but in that case the second (larger degree) ABC should be labeled WXY, since that is appropriate labeled for a double zig-zag pattern.
Also, I really don't like their first (C) wave. They're neglecting to label the first move downward and it's correction. There is no way that is part of their wave (1) as it's much larger. It looks like perhaps they are considering the first C to contain another ABC which is possible, but again should be labeled WXY instead.
Another labeling complaint is that they have cycle wave IV lasting roughly 25 days. Cycle waves should last 1yr to several years.
If one were to clean up their labeling, it could be a valid wave count. That said, I don't think it's necessary to label that move as a complex correction when a simple correction fits it well. Here is my labeling for the same correction.
I hope this is helpful.
Thank you for your brilliant analysis. Learning a lot from you.
My pleasure!