In wave ((II)) of the grand supercycle (the Dec ‘13 - Jan ‘15 correction), we retraced down 3 waves, (a), (b), (c), as shown below (log scale). The first wave (a) crashed down in waves I & III and then declined more gradually in wave V. This wave ended between 61.8% and levels of wave (I). Here, the SMI was turning up from the oversold area. This is where we had one massive spike upwards. This was wave a of wave (b) and found resistance at the dotted resistance line (remember we are using LOG scale). Price then broke this resistance line and completed wave (b) at the of wave (a). Then from here we had another 5 waves downwards to complete wave (c) and our correctional cycle was complete!
In wave ((IV)) of the grand supercycle, the correction cycle we are in now, we have retraced 1 wave so far which I have labelled (a). Wave I & III crashed down and then declined more gradually in wave V in a truncated fifth (this is just a fifth wave that doesn’t moved beyond the third wave). This wave ended between 61.8% and levels of wave (( III )), the 2017 bull run. Here, the SMI is turning up out of the oversold area and we have had a massive spike upwards, just reaching the dotted resistance line as shown below.
Notice the similarities here? I see analysts saying we are heading down imminently but I don’t think we can find a bottom so soon. The last correction was 413 days! I’m not saying this correction will be as long but it sure needs some time if we are gearing up for fifth wave. I have projected 280 days based on countertrends taking half the time to complete as normal trends and wave (c) being the same length as wave (a) in wave ((IV)). In Theory, wave 2 is almost never the same as wave 4 but here we are following it one step at a time. Maybe we could see a variation in the form of a double .. Who knows. I’m going to follow my idea until I see evidence of a deviation, then we can say history ISN’T repeating itself as it usually does. What are your plans for the months ahead?
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Next I am looking for a pull back to the 50% - 68.2% retracement levels to keep this bullish momentum going. There is strong support at $7700 and I have seen a lot of traders preparing an entry point here so this level could be bought up very quickly! The dashed channel line gives us a good expectation of where we can see a reversal. Keep your eyes peeled!
Good luck trading guys!
If we break upwards then it would look like we are entering a 5th wave as shown below. On the up target we have a lot of resistance which could stop the breakout from reaching the target.
If we break downwards then I would be leaning towards this being the end of the fifth wave and more downwards action to continue.
Only time will tell!
This leads me to believe we are more than likely completing our wave a in the chart above and going to retrace 38.2%-61.8% of this move.
I've started to build a short position at $9500 and will add on if bearish momentum is confirmed. We are testing previous resistance as support now (red circle) and the first target for me is to fail to confirm this as support and break through. The next barrier to break is the blue rising trendline. Confirmation of this is the final place I will add to my short.
I've shown a few targets for a reversal on the chart below and most seem to point at the $8100 - $8200 area which also coincides with the previous resistance, the dotted downtrend line. This is an important level to hold for bulls to keep the momentum, they do not want to be re-entering that channel!!!
Let's be ready to act with a plan and conviction!!
The H&S pattern on the hourly chart shows a target where we are hovering around now. This could be an area that bulls are looking at to enter and try push the price up, entering wave ((B)).
We can clearly label this as five waves which is interesting. I was expecting a 5-3-5 to this area but maybe we are seeing the first leg of the next bullish wave already? The higher we rally, the more likely this is to be. My plan tells me we should expect a reversal around these areas though so I am sticking by it until it is invalidated.
Good luck trading guys!