* This is my observation and NOT financial advice*
Since all of my targets have been successfully hit on my last trade set-up for Microsoft (MSFT), I thought I would post an update with an update on my next trade set-up idea looking at the 1-hour chart.
MSFT currently appears to be a playing out as a ZIGZAG retracement wave (5-3-5).
I believe we have finished wave A and are now close to completing wave B as it is playing within a rising wedge formation (trend-lines on chart).
For a ZIGZAG pattern (5-3-5 / ABC), a rule for wave B is that it retraces wave A either 50%, 61.8%, 76.4% or 85.4%, which here it is getting very close to the .764, or 76.4% retracement of wave A - which is approximately $176.97. It is also possible that wave B could exceed the .764 and make its way to the .854, or 85.4% retracement of wave A - which is approximately $182.81, and would also coincide with the apex of the rising wedge formation.
Now for wave C, the rule is that it is either a 61.8%, 100% or 123.6% extension of wave A, making our respective targets: $142.29, $120.07, and $106.34. I personally think we will at least make it to the 100%, or 1:1 extension of wave A, and possibly go for the 123.6%, or 1:1.236 extension of wave A.
With the current price trending right below the .764 retracement of wave A, and although it may make its way to the .854 retracement of wave A, I believe it would be a great time to enter or ladder short positions between the .764 - .854 and set a stop-loss (SL) slightly above the all-time high (ATH) price of $190, and target the 1:.618, 1:1, and 1:1.236 extensions of wave A - which would provide a respectful Risk:Reward ratio (R:R) of 2.47, 4.06, and 5.03 based on those targets. It is apparent that there is a greater R:R favoring the downside at this current level.
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