I call a trade a frog-kiss trade if the potential reward is huge and the necessary stop is very small. Because of extremely high R/R, the percent win rate can be as low as 30% and still give huge profitability. The Russell 2000 futures
had a 5 wave up Nov 16- Mar 15, followed by an ABC down, where the B wave retraced all the way to the highs. This is much more common in a major trend change than in a corrective ABC followed by additional uptrend. If indeed it were a trend change, then the C leg down may be W3 of an impulsive five wave down, or w1 of W3 down. This C leg down ending Apr
18, was followed by a 5w up, and this is where we are now. That 5w up may either be the first leg up of a new impulse going to major new highs, or it may be the end of a complex w2 up, which could be followed by a strong downtrend. While many other things suggest continued strength upward, three things make this a perfect spot to risk a frog-kiss, as it won't hurt much, and could turn into a prince. 1) the wave count described could go either way, but actually favors down, 2) price touched just 113% of the price delta Apr
11-18, a classic bull
trap spot, 3) H&S
in the last 4 hr
of May 6. A stop at 958.7 is cheap insurance for possible targets of 949.7 or lower. Frog-kiss trades also offer great opportunities for SAR
, if the alternate scenario rules.