Pure Pattern Play Potential | $USD $CHF $EUR #SNB #Forex

FX:USDCHF   U.S. Dollar / Swiss Franc

Since we discussed about #ElliottWave's Diagonal Triangle earlier today, then touched on the Shark and its acolyte the 5-0 Pattern, I thought it might be good to look at another example of these, which seem to line up into a Short opportunity in the $USDCHF pair.


Now, on the fundamental side of things, remember that tomorrow is a big day for the #Euro, since a rate decision is pending. While the current rate stands at 0.25% and the consensus sees it move to 0.10%, one should expect a downward reaction in the $Euro itself.

Considering that the #SNB has an interest in maintaining a floor at or near 1.20, it comes to reason that a fall in the EUR:CHF balance could force the SNB to pursue three possible actions:

1 - Do nothing: Simply remain at a zen-state of observation and reflection
2 - Follow the Euro: Let the pair settle to its 1.20 floor
3 - Copy the ECB: Adopt a similar rate adjustment that would keep the current value at a net-zero momental change.

In the first option, the SNB would simply wait to act, letting the value define its own relative level, then adjust with possibly a one-time lever action.

In the second option, this would require constant rate adjustment just to keep the 1.20 leveled.

In the third option, it would simply match the rate, so that the each change in coefficient cancel one another out.


In the chart, I have posted a 4-hour diagonal triangle to the left, and a Shark/5-0 patterns to the right in a daily chart , with the schematic outline of that same diagonal triangle, to put all into context.


The diagonal triangle is paced at a 3-wave             motion, such that it is defined by a 3-3-3-3-3 pattern (each 3 is represented by a a-b-c wave in blue). The importance of this pattern is that it is an Elliott Wave impulse wave that terminates the 5th wave of a 1-2-3-4-5 impulse move, and thus opens the floor to a corrective A-B-C. This A-B-C pattern is not inscribed in the chart, but it simply refers to the possibility of a significant downward correction.

Note that I have used a pattern-based projection (using the 5-0 pattern as a manner of 50% correctional move, which typifies the 5-0 pattern following a Shark completion at Point-C) - This is NOT the result of my predictive/forecasting model, though.


In this combination of patterns, the 5-0 is quite often the ensuing pattern following a Shark completion. Remember that the Shark starts by a number (zero) and completes at Point-C, as it often acts as the "gate-keeper" to the 5-0 Pattern. The author of these and other well-known pattern, Scott Carney, can be contacted and his material reviewed through his book: "Harmonic Trading".

As indicated above, the projection point is based on a 5-0 pattern. However, the origin of the C remains unknown, except that I suspect that 0.90002/0.90037 represents a potential range from which price might roll, as it completes the diagonal triangle.


At this point, the diagonal triangle continues to unfold, and remains completely speculative. This play was used simply to illustrate the viability of pattern trading if you chose to do so, although again, we have to wait for the completion of discreet elements therein to really appreciate - or not - its trading value offered to pattern traders.

Those who know me know that I put down pattern trading more often than not, simply because I have come to depend on another beast, but there are a few patterns that I have come to respect most, and there are inscribed herein and defined above.


David Alcindor
Predictive Analysis & Forecasting

Twitter: @4xForecaster
David Alcindor
Alias: 4xForecaster

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06 JUN 2014 - update:

From Twitter:

"$USDCHF: A definite throw-over at 5, then decline towards forecast target - via @tradingview | $USD $CHF #Forex"

Quite a violent completion of the diagonal triangle. Nonetheless, after a typical throw-over, price finally moved in the direction of our forecast. As indicated earlier, the target is the result of a Shark completion into a 5-0 pattern follow-through. It is not the result of my prop predictive/forecasting model. Because the price oscillation varied so much, I expect the 5-0 based target to have moved up a bit.

However, in my experience, the central apex of a Shark (i.e.: Point-A lined up with the current target value) represents a fair point of return for 5-0 to complete. Therefore, I will keep it as is, untouched.


David Alcindor

+1 Reply
04 MAY 2014 - TECH-NOTE:

Note also that a similar pattern is occurring in the USDollar, which is pegged not just against this Swissie, but also against a larger basket of other major currencies. So, expect the ECB decision tomorrow to probably have a rippling effect across all majors on the back of a chain-reactive move through the USD:

David Alcindor
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