Past price action
A Wave 5 was completed up from Wave 4 (9,3k). This was a truncated 5th with the height of Wave 3 not being reached. The wave ended in a Irregular Flat initial correction sequence and then pushed down for a 5 Wave impulse. The impulse ended with an extended Wave 5, triggered by some external news. A retrace on the corrective wave is slow but is underway.
Following EW Theory, corrective sequences can not just be 5 impulse waves. They must be part of a 3-3-5 or 5-3-5 combination. If you accept the wave count shown, there is more to come. As a minimum, a 3 wave retrace followed by 5 wave impulse down is required. This could then enter a new impulse wave up or do an X up and enter a combination pattern going further down.
Typical patterns for 5-3-5 are:
B : 0.382 - 0.5 retraction on A
C : 0.786 - 1.618 the length of A, with 1:1 being the most frequent.
Scenario 2 (shown below) is an alternative count which would allow for this wave 5 to be completed. That would have had the 5 waves up completing on 20 Feb. It has then posted 3-3-5 which would likely have now bottomed out. As above, this could then enter a new impulse wave up or do an X up and enter a combination pattern going further down.
Both options are valid and possible but my conviction says we completed 5 waves on 5 March, not 20 Feb and must do a 3-3-5 or 5-3-5. I'm comfortable we have done 5 waves and can rule out 3-3-5. Therefore I believe a retrace is required, along with another 5 impulse waves down.
I would like to sell my core holdings at the top of the retrace but I can not rule out scenario 2, which will continue on higher. It will be impossible to tell which one is playing out until relatively late in the scenario. I will try and sell out if I see clear signals that a new impulse down has activated.
My conviction is that we will come up from the C Wave and I will look to buy back in at the bottom. I expect a 0.382 retrace for B and will count the waves down but will likely target a 1:1 on the length of A. These targets can be adjusted once wave B has completed.
Targets using current data:
B : 10,200
C : 8,200
We then have a few scenarios, but two are most likely:
1) ABC complete and down for 5 more large impulses
2) The ABC I have labelled is actually wave 1 and 2 of a new 5 wave impulse.
My guess is that it is not (2) because that A leg does not look like a 3 wave impulse.
A fringe scenario is the AB we have already done was a partial correction and we have just started the wave 1-5 of ABC correction.
I will likely short the top of this wave. I will manually manage the stop, if it looks like we are going into a new wave (rather than just extending the current), I will stop the order. Once I see the retrace is on, I will move the stop to just above my entry in case of a double top.
Initial target is for a double bottom but I will almost certainly let this play out.
Note the top of this wave is NOT where I have indicated. It is when the 5 waves are complete, which may be difficult to judge.
My conviction is we have completed the A leg, with a 5 wave structure. We then had a small retrace for B and are now in the first of 5 waves down to $8k to make a 5-3-5.
We just completed a three sub-wave impulse down and so need to do a retrace. The retrace so far has not got to 0.382. It could well retrace to 0.618 (9.6k) but I would want to see a break above 10k or clear impulse wave structure before I go in.
I do not think so, but we *may* now have completed the 5th wave of a bigger ABC (scenario 2) and heading back up.
Given the low retrace on the B wave, the targets for the end of this 5-3-5 are now 8k, assuming a 1:1 between this C wave and the A wave. However it can land anywhere between 0.786 and 1.618. I expect we will see a dump and bounce on $8k. However, that does not mean it is plain sailing from there. We could go into an X for another ABC down.