Currently, we are in a complex corrective wave (based on Theory), otherwise known as a WXY correction. A WXY correction is a correction in which there are 3 corrective formations that play out before a reversal is expected. The first formation that played out (W) was a simple formation. This was followed by the second formation which was an expanding triangle (X), and we are currently in the final formation which is playing out as a (Y) and not a second as I had assumed in my previous idea.
Now we know that typically a triangle formation signals that there is only one last corrective wave that will follow before a reversal is expected, and this is why I believe we will see a reversal after this last formation plays out. This final formation is also shaping up to be a (as shown in the chart) which means it will, for the most part, travel sideways.
As depicted on the chart, we are currently on Wave B of the flat formation (made up of A, B and C). Wave B is known to retrace at least 90% of Wave A (if not more), which is where I got my RED target range from. After retracing at least 90% of Wave A, we can expect Wave B to end and this should lead to Wave C which is supposed to be a 5 sub-wave impulse wave. Interestingly enough, this point where Wave B ends and Wave C should start also co-incides with the top of a on which would validate our expectation of a drop in price. Rising tend to be patterns that result in a breakdown in price.
Finally, Wave C is expected to take us back to the bottom of Wave A (plus or minus a bit) and this is where I got my GREEN target range from. This point also lines up nicely with a supporting . This is where I will add another long position in anticipation of the reversal which is expected after the completion of this formation.
Side Note: Once we see where Wave B ends, I will be able to adjust targets depending on how much of a retracement we get with Wave B. So take the price targets with a grain of salt. Estimates will get better as we see how each wave plays out.
As we can see in this updated chart, Wave B has completely retraced Wave A and hit my target in the RED ZONE. At this point two things can happen:
1. Wave B continues HIGHER and retraces PAST the beginning of Wave A. This would mean that we have either a RUNNING FLAT formation or an EXPANDING FLAT formation. Note that the rising wedge on RSI still has room to run, so this is a real possibility.
2. Wave B STOPS here, and Wave C begins. This would mean that we have a REGULAR FLAT formation. The beginning of Wave C should also coincide with the breakdown of the rising wedge in RSI.
Once we see where Wave B ends and Wave C starts, we will be able to come up with much more accurate targets for the end of Wave C, and this will tell us when to take long positions for the imminent reversal.
I will post another update once Wave C begins.
As we can see from the chart below, Wave B has now retraced PAST Wave A, which means we are now in scenario 1 from the two options I outline in my previous update. This means we are either looking at a RUNNING FLAT formation or an EXPANDING FLAT formation.
If this is a RUNNING FLAT formation, it means when Wave C occurs, it will stop short of $990 which is the bottom of Wave A.
If this is an EXPANDING FLAT formation, it means when Wave C occurs, it will shoot PAST $990 which is the bottom of Wave A.
NOTE: RUNNING FLATS are a very RARE occurrence, but we can't rule it out because it is still a possibility.
Once Wave C starts, we will try and count the waves and determine whether we will see a RUNNING FLAT or an EXPANDING FLAT to determine if we should buy above or below the $990 level.
When will Wave C start? Looking at the chart below, we can see we are still in the rising wedge on RSI AND we have a rising wedge on the price chart the closes at around $1200 (I have made the trendlines of the wedges dark green so you can spot them!). This means that before we get to $1200 we WILL see a breakdown in price and RSI and this will signal the start of Wave C.
Will post another update once Wave C has begun!
The top GREEN section is the expected move if this turns out to be a RUNNING FLAT, meaning Wave C will get stopped short of $990. This was calculated by measuring the length of Wave A (about $110) because in a RUNNING FLAT, Wave C tends to equal the length of Wave A. We can also see this price point rests right near a major support of the upward channel we have been in, so it makes sense to see a reversal there.
The bottom GREEN section is the expected move if this turns out to be an EXPANDED FLAT, in which case C will go BELOW the $990 level. This level was found by taking the 1.618 fib ratio of Wave A as the measured move for Wave C.
PS, my charts that I posted didn't save after I posted them so the chart below was recreated. I believe all the major points are the same though, just a heads up in case any small details look different.
"BE ON ALERT GUYS! We have a triangle (consolidation) forming here on the 4th sub-wave and these triangles are known to signal an end to the wave of a larger degree. That would mean this triangle is signaling an end to the C wave which we believe to be the last wave before a reversal!"
The scenario above would be correct if we knew that this was going to be a RUNNING FLAT formation, but if this happens to be an EXPANDED FLAT formation, then that triangle in Sub Wave 4 could simply be signaling the end of Wave 1 of Wave C, which we know will have 5 waves in total. That means our bottom target may still be in play! Will be watching price action here to get clues to how this may play out.
At time of writing we have crossed back into our first target range of $1080 (lower bound) but this looks to me like a technical bounce and is NOT indicative of a reversal. We may test the green channel that we lost above (around $1030) but ultimately I am confident we are headed lower.
The second target range of $920-$970 is now in play.
A reversal will only be able to be confirmed if we regain $1200 levels. Until then we are in a bearish downtrend.