This is for the trader with balls made of steel. The recent rally has been...unattractive and hard to get a good read on. Regardless, here we are. The rally appears to be fatiguing into an ending diagonal for the 5th and final wave up (for now). The most conservative trader will wait for a pull back towards C on the chart and then BUY this bull market up with two hands (easy to say that at the top isn't it?). But for a short term trade with a small position size you could short this pending correction with managed levels of stress. Watch for a strong break down at 4 or another failing and meandering 3 wave rally towards blue number 5. Enter a short at blue 5 (or before it, price may not get back up to the TL) or a strong break at blue 4 a break down of the diagonal anywhere. This trade is wrong on a strong break above the upper treadline of the diagonal. Again, this is a risky trade idea, position size accordingly. The post is 'short' but i am a longer term bull. By all means, take profits early on this, waiting till C is not advised.
Comment:
the gap down certainly supports the main idea that a correction is coming, so far at 3.55x on the henry hub continuous chart and could be counted as only a 3 wave decline, if we see some sideways action or a retracement up to 3.62x and then a decline below 3.540 ( i previously marked a line labelled 1x.618 in the event that this could happen as a potential target and now we can use this and 3.440 as targets for the intial 5 wave decline) we may begin to believe the diagonal is breaking down and the correction is underway with no attempt at blue 5 above. Even if we manage to meander above towards blue 5 the price can turn down into correction mode anytime a 3 wave retracement is complete and this can be before blue 5.
Comment:
simply put, the diagonal is still in play unless we have some strong follow through
Comment:
taken some profits at 1x.618, looking to re-add shorts at .618 retracement from last high to todays current low which would give us exactly the gap fill
Comment:
giving it some time to rally, a day or so
Comment:
currently looking at these levels for retracement to c before re-adding shorts, note there is no chance the previous diagonal idea is valid any longer
Comment:
its currently unclear if B is in yet or not. if it is, then price wont rally much past the line at 3.520ish and will then head lower towards C. If price rallies above 3.520ish t then there's a good chance B is not in place yet and we run the risk of B around 3.640ish. I am currently out of this trade waiting for direction (i certainly don't need to hold a short if this could rally that high but i will be jumping in if we drop from either lines)
Comment:
Still unclear, either we break down here and form a 5th wave from the recent high and possibly end a very shallow correction or we are in a triangle/wedge in which we rally weakly to 'e' and then drop to the expected .5 to .618 correction (which is where the head and shoulders would put us as well). I'm leaning towards the triangle idea atm and will short at e with a stop convincingly above the triangle.