is excellent for anticipating wave duration and change. Unfortunately it is not precise, and is often poorly applied ( not by me :) ). However, it remains a major part of my analysis and personal positioning using trend movement. Sprinkle in corroborating technicals ( , , , Fibonacci levels, trends) and a plausible picture is formed for planning risk levels and positions.
Throughout the correction the standard "abc" pattern has been used to target the decline's destination, whether the pattern morphed into a triangle, flat, etc. We now add a confirming technique of wave "a" = wave "c" to target the correction's wave "c" end (a to b's bottom, then used with b's top to estimate c).
We now focus on wave "c" in progress (red) and target 2425 as a reasonable end. However, that is an ideal goal and not a certainty! Getting there includes hurdles at the lower (yellow), and then the February low of 2532.
Adding risk and position size is a process, and I expect my initial loading to start at 2555. From there I will add more, whether we go up, or down. On the downside I expect to add more aggressively near 2425, while on the upside a cross of the 50d (red) or the 10d from below the 20d (not shown) will trigger adding to positions. In all cases the additions are at levels below the initial risk reduction during the correction's early phase of wave "a" in October.
Why here, and now? Risk becomes more favorable as the decline terminates. What follows is a higher degree wave as either "B" (not shown) after the initial lower degree "abc" (my primary read), or a new 5 wave impulse upward to new highs (not shown, alternate read). Both lead to an upward trend once the current "abc" completes. It is time to plan for a as the current down trend concludes.
Lastly, I've done some housekeeping (thanks to reader comments) to move the top of wave "b" down to the actual recent high of 2816. I also tightened the zone for "Correction area for Wave from 11/2016" (green and yellow horizontal lines).
Question (an exercise): If you see the right indicators for RUT to go up, which of these 2 transactions would you enter? The figures are as of this past Friday's close 12/14/18.
Risk 2% of your equity of $10K, thus $200.
Max Loss (Stop) = 2ATR
ATR5 = 20.52, Price = 140.61
Buy 4.873 shares (or 5)
Cost $685.19 (4.873 x 140.61)
Protective Stop $99.57
ATR5 = 3.967, Price = 49.27
Buy 25.207 shares (or 25)
Protective Stop $41.34