NASDAQ:AEP An impulsive break of 78.15 against the wave (y) high of 81.08 should confirm that wave (c) is in progress. Price should decline through at least 75.96 and 74.97 towards 69.38. A violation of the 81.08 will invalidate the wave count.
Comment
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The impulsive decline through 79.68, following a failure to break the key 81.08 level, confirms the completion of wave (b) and prices should now begin to fall through 75.96 and 74.97 as wave (c) develops lower. Any upside should remain corrective against the 81.08 high.
Trade closed: stop reached
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Unfortunately, AEP reversed through the key level of 81.08 against the expectations of the bearish interpretation. Despite a seemingly clear five wave impulse to the downside in wave (a), our interpretation has been invalidated.
A sound risk management is important for this very reason, even textbook patterns may fail. It is not proof that the Elliott Wave Principle does not work but rather it is proof that analysts are not capable of labeling wave counts to 100% accuracy in real time. Thus, one must operate using a "probabilistic" mindset and prepare for multiple possible outcomes.