Two Potential Counts to finish Bullish Impulse or Correction
Now that we have a close of the 2nd impulse wave (or possibly "B" of a correction wave), we can now watch to confirm one of the two counts that are in my chart. We could come back down into 4th and then reach out to the top of the channel resistance that shut us down at the last head and shoulders pattern. That would be our 5th wave. The other alternative, less likely in my opinion, would be a drop from here and confirmation of an ABC correction. To give insight as to how I traded this, after the close of wave 1 I set a buy order and stop loss for where I though wave 2 would end. I set a buy at a 50% retracement of wave 1 and a buy at a 62% retracement of wave 1. One of my buy orders went through and I excited the position at a decent gain just recently at what could be the close of 3.
The reason I didn't hold until the 5th wave extension is the consideration that this was only an ABC correction. Cowardly? Perhaps. But I would rather walk into my next trade with the confidence that I rarely lose than trying to capture that last 2%. I really do believe that 2018 is going to be an awesome year for all of us, and that we are currently in what has been a long descending bearish channel that will end in the not-so-distant future. The boom days are not quite back yet, so don't let greed of an additional 2% cause poor risk/reward decision making. If you are consistently having successful trades in our current trading cycle, that is victory enough.
The reason I didn't hold until the 5th wave extension is the consideration that this was only an ABC correction. Cowardly? Perhaps. But I would rather walk into my next trade with the confidence that I rarely lose than trying to capture that last 2%. I really do believe that 2018 is going to be an awesome year for all of us, and that we are currently in what has been a long descending bearish channel that will end in the not-so-distant future. The boom days are not quite back yet, so don't let greed of an additional 2% cause poor risk/reward decision making. If you are consistently having successful trades in our current trading cycle, that is victory enough.
Comment:
I do believe that the ABC correction is ruled out and we are working on a 4th close or 5th wave extension. We have topside resistance from a descending channel line that forced the close of wave 3 right at a 1.618 extension of wave one, just as planned. Wave 4 typically retraces .50 or .618 of wave 3. We have already hit .50 retracement and appear to heading towards the descending channel. If broken we should hit the 5th wave. If you have been riding this from the close of 2, way to go. We are now waiting to close our position we opened at the close of 2. If we have a 5th wave failure at the trend line we will take our gain, otherwise we are waiting for the first bearish volume candle suggesting a reversal back down.
Comment:
I do believe that the ABC correction is ruled out and we are working on a 4th close or 5th wave extension. We have topside resistance from a descending channel line that forced the close of wave 3 right at a 1.618 extension of wave one, just as planned. Wave 4 typically retraces .50 or .618 of wave 3. We have already hit .50 retracement and appear to heading towards the descending channel. If broken we should hit the 5th wave. If you have been riding this from the close of 2, way to go. We are now waiting to close our position we opened at the close of 2. If we have a 5th wave failure at the trend line we will take our gain, otherwise we are waiting for the first bearish volume candle suggesting a reversal back down.
Comment:
ABC correction ended up being the right call. Now we can see the benefit to getting in at the close of 2 (or B in this case). Regardless of whether a structure is an ABC correction or an impulse wave you are safe with a wave 2 (b) confirmed close.