What I am showing here is the there was a that was completed right at the bottom of the contracting . What I also drew in is a POSSIBLE POTENTIAL pattern that has it's C point right at that same point where it hit the bottom . If both these patterns hold and prices do not reverse back down to take both of them out, then it's a good probability that a wave (3) has started.
If prices do still continue to consolidate and whip back and forth and does reverse back down invalidating both the bat and the , then if it breaks through that bottom , there is a POTENTIAL perfect waiting to be completed which could send prices back up. If this happens, then that would be a false break down below the triangle and a move back up from there would be a STRONG signal to go LONG.
MY TRADE PLAN
I didn't buy on the bat completion as I needed to see more price action before getting in. So I am sticking to my original plan which was to wait until a break out ABOVE the triangle to get LONG. If and when that happens, then that would also break the B point of the confirming its' C point and increasing the probability that the would complete.
Please keep in mind that I am not giving any trading signals or trade calls here. Only providing my own trade thoughts for your benefit and insight as to my trading technique and style. Please don't ask if you should or should not take the trade or ask for stop loss and take profit levels. Any SL or TP given on my trades are my own I have used for my trade and are not recommendations for you to use. If you are not sure, then you do not have a trading plan for yourself in place. I suggest you make one before you continue to do any trading!
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Just keep in mind that the whole point of using the patterns is to be able to define and control your stops so that your losses are small relative to the potential profits. In the case of taking a trade using the C point, the stop would obviously go below the .886 on a bar CLOSE. and also the X point of the pattern. This makes the stop loss pretty tight and defined making a very good trade.
Hope that explains it. Good luck!