Recently, we entertained a lot of conversation on market geometries, more specifically in discreet geometries that easily come to the eyes, and others a bit more buried in the occults. Of late, we spent some time reviewing Wolfe Waves patterns, which offer the pattern trader that "next level" of market geometry complexity, given a set of rules that are really quite simple.
Looking at the Nikkei, I had a sense of deja-vu. In fact, I even had to look up what this French expression would translate into Japanese - Wike says: "dejavyu" - Again, another sense of deja-heard. But it's just me.
The chart itself comes very a-propos considering the topic of market symmetries and now Wolfe Waves, as a near perfect symmetry is setting up over the months ahead.
First, at the bottom right of the chart, a Wolfe Wave (arguably, a Diagonal Triangle of the Ending type for the Ellioticians), completed the prior abysmal descent through a Bullish type of Wolfe Waves pattern ("WW").
That completion was signaled at the point (circled in GREEN in the chart) when price crossed over the upper boundary of the WW. As price rushed into the blue yonder, it coursed its way all the way up to its 1-4 Line, which is customarily known as its Profit Line.
Note how the current Bearish WW is setting up.
A quick note on the contents of the chart: You will notice that the words "tunneling" and a long rectangular feature within each of the patterns. In prior lessons on the WW, I would ask traders new to the pattern to add a measure of assurance that the pattern they are looking at is indeed a WW. And this is simply done by looking for a pathway which appears in most WW patterns, as if price had moved out of the way to allow for the safe passage of the 1-4 Line. This feature, although not mentioned by the author of the WW (Bill Wolfe), is a signature trademark that I would be looking for to ensure that I am seeing what I need to see, sort of an obligatory deja-vu ... Again.
Feel free to visit the "Predictive Analysis & Forecasting" Room where many occult geometries are discussed, along with trading pearls and other less-public sanities - Here is a link: tradingview.com/chat/ .
Cheers,
David Alcindor Predictive Analysis & Forecasting Denver, Colorado - USA
@Sandeep_Gupta - Excellent! This is a great find, and the target is very well defined, at its horizontal of 1-4 Line. Remains now to be sure that this is a reversal point.
Now, to be precise, I would mark 5 along the 1-3 Line, right at the midpoint where the red candle falls (about the 5th candle behind the one you marked as 5), and I would mark the current 5 as 5-prime, 5'.
Then, I would take a parallel line of 1-4, and make it start right at Point-3.
IF indeed, that translated 2-4 Line starting at Point-3 ends up touching the tip of your 5', then you confirmed the 5- position.
Is this making sense? If not, I would be very happy to draw it for you.
Patterns about out there. If you think of pattern as you would think of letters coming into vocabulary, and words fitting into sentences through grammatical rules, and paragraphes arranged into stories told in tomes, then you can figure patterns out, taking Fibs as the letter-like unit.
For instance, when I called top at the 5' position of the Wolfe Wave pattern ("WW"), the pattern itself does not have anything intrinsic to itself to tell you when 5-prime is done rising (in the case of a Bearish WW).
Instead, I made use of some prop pattern I have discovered that laid within the language fabrics of the market, waiting to be discovered. Patterns in and of themselves are not as important as when they fit within a system of patterns. Just like words, patterns are made up of letters, which the market seem to be blurting out from time to time.
It's the correspondence among patterns that matter, especially when one "word" fits into a much larger phrase in which the story ceases to exist until that word come into place.
The total relationship is vital to predictive analysis and forecasting - In the case of the e-Mini, a prop pattern called Janus Pattern came into play as the last word of the phrase, so to speak, so as to offer a sensible reason to call a reversal when it did - Here was the chart:
Price is attempting a Diagonal Triangle. An overhead target is attempted using basic Fib projection (never a sure thing, as the market looks at all the retail orders that are likely to be defined by Fib-based computation as most technical trader would do, and typically chooses to aim higher - This is a process often referred to as "hitting stop-losses" - Not an accidental process at that either.
Here, price hit the target dead-on, and the junior trader should feel quite smug about it. However, the market has something else, of a counter-expectation in mind. The trader should prepare for it.
How?
Simply by first taking a step back and looking at the relatively bigger picture. Here, we move from a M1 to a 15-times enlargement:
In this chart above, a 2-4 Line projection off of 3 would have underestimated the 5-prime position, while a projection off of the 1 would have possibly underestimated that as well.
However, an average of the two would have been closer. These projections are not noted here, simply because the reversal at the tip was based on a hidden geometry (Janus Pattern), but even without hidden patterns, the 2-4 Line projection should be enough to approximate a reversal.
Remember that the most common behavior is to revert to 5-prime. Second most common is staying at 5. Least of all (in a very aggressive market), is the 5-second (5"0 move.
I'm glad you like these patterns.
David
4xForecaster
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PS: Remember the "TUNNELING RULE" as a signature to your WW confirmation. It's sort of a quality brand I have discovered as well. Basically, if you magnify the 1-4-Line, you will notice that price passing through it tends to "make way" in a way that builds a tunnel as if to accommodate this passage - David
4xForecaster
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TUNNELING IN WW:
David
IvanLabrie
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Would this be a valid WW David?
4xForecaster
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@IvanLabrie - Hi, Ivan: Ideally, the bottom alignment would be pointing downward, not up, for it to qualify as a WW - David
IvanLabrie
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So I'm bending the rules a bit there. I thought it was ok if it was inside a corrective triangle/diagonal. Thanks, back to the drawing board. :D