This trend has developed well so far and it is in a corrective phase since August 2018 low which appears to be developing what theory refers to as of 3-3-5 formation.
Rules for Identifying Flat Correction
To correctly identify a , it needs to meet the following rules:
1. Waves “a” and “b” consist of 3 swings each which can be simple zigzags or double zigzags within them.
2. Wave “b” must retrace wave “a” by at least 90% or more.
3. If the above are met then wave “c” would develop in 5 waves and it reaches the proximity of peak of wave “b”. There variation of flats but this one is the simplest and one which
we can work with for now.
Therefore the gives clear advantage in trading the wave “c” such as one about to form in EURUSD as follows:
Wave “a” - formed a from 15th Aug to 24th September.
Wave “b” - from 24th September to 26th October (potentially) which retraced wave “a” more than 90% ( Dec 2018 contract fractionally took out the low of 14th August).
Wave “c” - to commence from 28th or 29th October and likely to complete by Mid - late Nov (approximated using various time symmetries shown on the chart) with target in the proximity of 1.75 – 1.18. We also have declining 200 daily MA around there.
Upon completion of wave “c” the entire is completed and price resumes the prior trend leading into that correction.
COT Data: Back in March 2018 the Non Commercials were at historic extreme in their Net long. This declined progressively to the point they briefly flipped to the Net Short around Aug low and this turned back to net short again since 24th September and has been growing to close as at 23rd October at Net short of 30,304. This is supportive of possible bounce in context of this . Please see the chart with data below.
Discretionary Entry could be on price moving above the high of 26th October or adjusted accordingly if we have new lower low early in the week.
Caution: If we do not see 5 wave swing or price seriously breaks below August low then some other pattern is in progress.
Warning: This is my interpretation of price action using TA approach that I consider helps the me most, but could be completely wrong. Therefore, as always, do your own analysis for your trade requirement and ignore my views.
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Longer term EURUSD is in major bearish cycle. In the short term it is not entirely clear what this might develop into. If it develops into an expanded or a running flat then we might still get a 5 wave rally back to 1.16 area. Alternatively it might be forming a leading diagonal (3-3-3-3-3 structure)commencing from April high with wave 3 in progress and probably has some way to go. Will review before republishing shorter term view but here is the chart showing showing potential wave 3 in progress