Here is an interesting challenge presenting from recent price action in $USDJPY , where price appears "to have been going nowhere". However, a methodical approach through counts might simplify the field in terms of geometric options and probable direction.
DECIPHERING THE WAVES:
The recent price action in $USDJPY may have left some traders wondering what direction might the market take especially as we face the following blank price field and contemplate recent price gyrations:
First, let's untangle the recent price action by simply recognizing simple a-b-c features of zig-zags with 5-3-5 internal wave construction:
Next, let's acknowledge that the recent swift down move has all of the respectful characteristics of a motive wave, defined by intermediate waves (1), (2), (3), (4) and(5).
Let's also situate ourselves in relation to the current price action and wave count, by assuming that Intermediate wave-(4) has completed with 5-3-5 internals of a , and that we are currently in the development of an Intermediate wave-(5):
It is also well worth noting that Wave's Rule of Alternation appears to apply here, as this Intermediate wave-(4) took on a simpler a-b-c internal structure of minute degree expressed across a larger amplitude compared to Intermediate wave-(2), which displays a more complex internal structure across a much flatter amplitude.
Now, turning to Intermediate Wave-(5), perhaps it has become apparent that the dominant geometry expressed by points 1-2-3-4-5 in the field appears as an , which characteristically appears in 5th wave of impulses (as well as wave-c of flats and corrections), thus ending the entire impulse at minor degree wave-5.
As an aside, please also note that the recent upswing in price may have been caused by this internal Contracting Triangle ("CT"), expressed in blue capital letters A-B-C-D-E , whereby price rallied following this geometry's signature "under-throw":
Price is expected to rally and validate the 2-4 Line of the dominant , assuming that this is the most probable developing geometry that would offer the mechanism of next price action.
However, the interim move will require some patience, as I would expect points 3 and 4 of said geometry to develop in a pattern, validating internal geometric lines as shown in following chart - Note how a 0.618 level aligns with the internal CT's lower border projection and highlighted R/S level (large arrows across band):
Ultimately, I would expect the entire Intermediate impulse to end in a truncation, as shown below:
Above program would become invalidated if price where to rally in the following fashion. For this contrarian inquiry, I have forced the Predictive/Forecasting Model to define a probable target, as shown in the chart, and added a possible to support this alternate plan:
Predictive Analysis & Forecasting
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Expecting price to meet resistance at defined 120.069 level - RSI's correlating pattern with price is worth heeding, as well:
Price ignored the speculative zig-zag I had anticipated prior to validating the upper border of the channel, and instead went right for it:
In Fibonacci terms, taking point measurements from Intermediate (4) to Minor-4, this retracement is currently resting at 0.750 (a great preparatory signal level), and is expected to remains subdued to the 0.786 handle.
Worth keeping under close watch - I decided to get out of my position from Minor wave-3, expecting a near-completion of current Minor wave-4, and thus a probable decent to 116.707, which is likely to act as a temporizing R/S level (i.e.: expect a reaction to be capped by the under-belly of the 1-3 Line (BLACK) equivalent to an aggressive counter-trend of 0.214-FIB (AFT Method), although if this level of resistance failed, then the A-C Line (BLUE) would present as a next-probable contender, in which case, a significant 0.385-FIB would occur.)
This is all speculative, but a game plan based on objective data (Fibonacci levels, structural levels and R/S lines) can offer a probable plan of anticipation, sort of a structural game theory.
BOJ decision remains pending - Price continues to move as forecast:
TG-1 = 121.645 remains a "make-or-break" level, likely to INVALIDATE the bearish target defined in the original analysis.
Price mulls higher-highs:
Price continues to rally. TG-1 remains in sight. As you may recall, TG-1 is a quantitative target ("Quant-Target"), which tend to define future R/S level if entering into new territories, or confirm prior R/S levels when moving into prior levels.
Quant-targets will also react in a limited fashion, retracing in the Fibonacci order of 0.386 to 0.618, in contrast to Qual-Targets, which tend to define reversals.
Thus, expect a limited retracement upon validation of TG-1.
Price continues to strictly adhere to the bullish forecast, with TG-1 = 121.645 - 20 OCT 2015 knocked out of the way without any interim due retracement (as the nature of these Quant-Target typically call for).
Instead, price continues to rise to the Qual-Target: TG-Hi = 125.225 - 23 OCT 2015. As mentioned in analyses done in minor and mojor $USD crosses, as well as #gold and #euro, there is a unanimous voice calling for a significant decline in the $USD.
Let's keep this Qual-Target in mind:
Watch for this potential retracement risk ... Geo's Off-Set Rule #2 would offer support as shown:
Adding a SL against the proposed retracement. Issue here is potential geometry pointing down for retracement (not reversal) versus Predictive/Forecasting Model dangling unanswered target above.
As mentioned before, Geo is best to define a probable trajectory, whereas Model is best to define end-point.
Price continues to carve lower-lows and lower-highs. A mechanism of ascent back to TG-Hi = 125.225 remains the object of this smaller timeframe analysis. Geo's Off-Set Rule #2 remains the highest probable mechanism to do so.
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Feel free to share alternate views. Understanding of what may really occur would be best supported by contrarian, alternative or other creative views, all of which is encouraged to post here and in any other analyses I have posted recently, of course.
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I mention these simply because quantitative targets (TG-1, TG-2, ... etc) will often revisit the level of the target that was hit - In this case, the TG-1 stands a good chance for this to occur, although this is by no means a consistent feature of these Quant-Targets.