Cocoa Short

Had an eye on this one for a while and there've been a few points I thought we might be making a high in this but so far taken no action on it (Which has proven wise).

Now we have a strong confluence of sell signals, though. We have the potential AB=CD topping patterns and this comes in at the 1.61 head fake level.

See strategy info here:

1.61 head fake is an optimal spot to short what may be the end of a parabolic trend. It's not a sure fire signal (By any means) but it allows for the defining of a small zone in which to make high RR bets.

Taking a short in this area now.

Comment:

Let's go through some of the things we expect to see in a 1.61 head fake.

The rule is a top will generally be made inside of the 1.61 - 2.20 zone and a breaking of 2.20 generally means no big top is being made.

Ideally, we look to see all the action above the 1.61 contained inside of a known false breakout pattern.

In this instance, we have that in the head and shoulders.

Once the 1.61 is retaken, it should act as resistance.

A failure to break the 1.61 extension of the last major pullback often denotes the end of the trend, or at least the start of a much bigger pullback.

Comment:

1,61 held.

Comment:

So, above is how we can sometimes use 1.61s to get ideal tops (This looks great when it works, do be aware it can fire out multiple false signals. Don't blindly short all 1.61 spikes).

Now here's how we can use it for bear break level.

Fib extension from low to high of the topping swing, if 1.61 breaks, we typically see a stronger drop.

1.61 is failing now.