A simple trade opportunity came up. Predictive/Forecasting model calls for a reversal at TG-Hi - 1.11972. Taking a step back and considering the entire system from a geometric stand-point, symmetries come to the mind's eyes here through AB = CD patterns.
While the current AB = CD pattern remains under development, a projection of the first leg comes to near-alignment with the predictive/forecasting model, supporting the model's target at 1.11972.
ELLIOTT WAVES' REGULAR FLAT:
Assuming that this developing symmetrical geometry arrives at a second AB = CD pattern, we would witness the formation of two Zig-Zag occurring at the top of a major trend. This would simply define an Elliott Waves' Regular Flat pattern, whose outer structure is defined by points A-B-C, and internal structure contains sub-wave counts, such that A, B and C would be borne out of 3, 3, and 5 sub-waves, respectively.
DEFINING PRICE BEHAVIOR:
You will notice also that I have made intentional use of Fibonacci values in the larger A-B-C system. These values were chosen out of a back-testing (sample to the left), where two dominant options suggest a consistent price behavior in terms of achievable depth within smaller occurrences of the Flat.
In both option #1 and #2, the values 0.114, 0.214, 1.131 and 1.272 suggest that at times, a Regular Flat (where Point-B retraces without exceeding the origin of Wave-A, and Point-C would fall slightly below Point-A) would contract internally to values as short as 0.214 (the complementary of 0.786-Fib), and as long as 0.114, and that it would also expand to values as short as 1.131 and as long as 1.272 (all these values being derived from the golden ratio, 0.618).
Hence, of the two options, I chose the contracting and expanding values that would best represent the large A-B-C pattern, considering that B is predicted to be at 1.11972. This would place B near 0.114 relative to the origin of Point-A, and thus this would corresponds to a reiteration of the Flat in option #2. For this reason as well, Point-C is defined not by the model, but merely by this anticipated reiteration in price action, defining a target low as TG-Lo = 1.05333.
OVERALL:Simple use of well-established market geometries have allowed the definition of a trading opportunity here, yielding the following targets:
The outcome of a Flat is a resumption of the major trend. IF and once this trend comes to validate this predictive analysis/forecasting, we would then look at loftier targets, which the model has pre-defined, pending directional confirmation.
Cheers,
David Alcindor Predictive Analysis & Forecasting Denver, Colorado - USA
Nice!
In your experience, how effective would you say this pattern is, David?
4xForecaster
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As with all patterns, they rarely make the 80% mark.
(highest recorded performance remains the Bat pattern, I believe)
- David
alex.a
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I would love that kiss by better than expected GDP of Canada?
kmk.msp
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@David What is invalidation level for bearish KOD
KMK.MSP
4xForecaster
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I'd seek a triple top, but it all depends on your risk tolerance. Some other traders might seek a 1.414-Fib extension. There is no real answer for these question (which I get a lot), because every trader will have his/her own set of circumstance, and it can only be based on the number of pips one is willing to expose.
The pattern is a triple-base (top or bottom), and risk management should NOT be based on the pattern, but on the personal definition of risk management. Always.
Simple, take the time this week-end to review your impulse waves. I recommend that you seek support straight from the source at Elliott Wave International, or simply get an e-book on the matter.
Once you have determined the EWP 5-wave structure in your mind's eyes, look for the following sequence of events:
1 - Look for a downward 5-wave from a new high at a H4 timeframe level;
2 - Wait for a 3-wave to retrace upwards, thus leaving behind it a relative low-point. Give it a numerical name: "1"
3 - Be sure that the 3-wave structure does NOT exceed the origin of the downward 5-wave structure. If it does, wait for next 5-to-3 sequence to occur once again. In a H4 timeframe, that gives you time to do other things.
4 - Once price completes the upward 3-wave climb and reverses downward, place a Limit Order slightly below where Point-1 was defined, and place a Stop-Loss slightly above the level where the 3-wave structure reversed.
5 - Now, go out, take your honey for a 3-day escape in the mountains, trim your toe nails, or learn to make noodles by hands, but do NOT disturb that trade until it falls to the TG-Lo value.
Kapish?
David Alcindor
4xForecaster
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03 NOV 2014 - Update:
CAUTION - BACA > B should annul all bearish intention for the time being.
Watch for this potential bearish Kiss of Death:
David Alcindor