Here is another educational trade involving a combination of the Predictive/Forecasting Model and the Geo. As you recall, the "Model" is very good at establishing targets, but poor at timing. Combining the "Model" with the Geo offers a high-probability visual pathway towards these targets.
In this particular case we have two sequential targets, both being qualitative targets (i.e.: TG-Hi and TG-Lo, imposing a deeper reversal impact on price compared to quantitative targets - TG-1, TG-2, ... etc. - which have a tendency to impose a shallower Fibonacci retracements in the order of 0.386 to 0.618).
As you may also recall, the WEEKLY chart recently hit a significant Qual-Target: So, the interest at this time is to decipher the mechanism of descent which is likely to bring price down to about 6.6000, as illustrated in the weekly chart above.
For this, we can focus on a daily chart and appreciate the following geometry:
Looking a bit further, we can also focus at the 4-hour level and look into the morphology of that geometry - What we are looking for is a Geo, with its high-probability price control, as a rationale for that descent to lower lows:
Now that we have defined the contours of the Geo, following is a schematic projection of a probable price pathway, given the Predictive/Forecasting Model's predefined targets, as shown:
Following also illustrate a prudent, conservative entry when dealing with this sort of geometry, where the orange square defines that level that would trigger a short, but not until price Breaks Across, Closes Across ("BACA"):
Once a BACA < 1-3 Line occurs, then there is nothing else to do, but let the Predictive/Forecasting Model receive validation:
OVERALL:
Above illustration serves as an educational demonstration of how to deal with the Geo, the Wolfe Wave and any other contracting geometries. However, with the combination of the Predictive/Forecasting Model, there is a higher degree of probability that can be reached, and this is how most of the trade I share with the TradingView community are defined.
Best,
David Alcindor Predictive Analysis & Forecasting Durango, Colorado - USA
Price is carving out higher-highs. Target at 8.84482 remains intact and in force:
David Alcindor
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12 NOV 2015 - Chart Update / Tech-Note:
Price continues to drill through arctic resistance ... Now hammering in a higher piton:
David Alcindor
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31 DEC 2015 - Chart Update / Tech-Note:
NOK hit 8.84482 target defined this past November, 08th ... High-probablility reversal exists at this level:
David Alcindor
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03 FEB 2016 - Chart Update / Tech-Note:
Price continues to fall, carving lower-lows, since completion of the large geometry:
Bearish target remains intact and in force.
Best,
David Alcindor
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04 FEB 2016 - Chart Update / Tech-Note:
As price continues to decline, watch for 8.12 acting as a significant resistance to bears - Although the Geo did not validate a 5' position, this level would represent a Geo's Rule #2 application.
In any case, the bearish target at 7.884, defined last November 08, 2015, remains intact and in force:
Best,
David Alcindor
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14 APR 2016 - Chart Update / Tech-Note:
Price just hit the level corresponding to the geometry's Point-4. Still, the original target, defined as TG-Lo = 7.88368 on November 08th 2015 remains in force and intact:
You do an amazing job at communicating your message with visual support. This is fantastic, I don't think this community can thank you enough.
Thank you for the education!
4xForecaster
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Thank you so very much @CryptoChartist for noticing - I do spend some extra time with laying out the charts and comments to fit the topic. I appreciate your noticing this effort.
Best,
David Alcindor
plok
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Many thanks for the update David, much appreciated. I've been following the development of this pattern closely over the past weeks and will continue to do so.
Hope that oil will continue its upward correction which should support a further strengthening of the NOK.
4xForecaster
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Hello @plok - I am glad you appreciate these analyses.
Although the fundamental correlation between oil and NOK remains important, I tend to keep this as a background property between these two, and keep at the foreground a distinct and separate view of the charts, especially when it comes to market geometries. I have seen often that if a geometry remains unfinished, it will tend to completion at the "expense" of otherwise two strongly correlated assets, accounting for the less-than 100% correlation.
So, if and once oil declines to the forecast 21.02 level, a decline in USD vs. NOK might still be occurring against expectation, as the Geo's cycle will "need" to fulfill its Geo-based rule (#1, #2 or #3).
Also, as USD index falls, the strength of its bears may also overcome that of NOK's bears, pushing the pair to lower lows, since this only expresses a relative strength.
In any case, as strange as this may be, I tend to trade assets based on the following probabilities (this is purely based on empirical experience):
The first two elements are proprietary-based, whereas the last two are fundamentally driven - This is pretty much how the workflow of my analyses remains structured.
Best,
David Alcindor
plok
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You're making a lot of sense here. I noticed too that sometimes the strong correlation between the NOK and oil seems to 'decouple'. EURNOK (which I try to trade) for example struggled to make new highs after early December 2015 while oil continued its selloff.
And indeed any currency pair expresses a relative value. A clear example is seen right now where NOK significantly strengthens against the USD (0,67%) and the SEK (0,50%) while against the EUR it weakens with 0,12%.
Norges bank is expected to deliver a (final?) rate cut on March 17, that could coincide with your 8,12 target.
The biggest challenge for me (guess for any trader) is to find a good method for myself to establish a view and trade from it. That is where I go wrong mostly. I've been following the markets for a long time, but never managed to put a decent system together for myself. I've always found Elliott Wave fascinating but that can only be used to validate a view I think. I've been reading Connie Brown's - Technical Analysis for the Trading Professional, but it's quite complicated and I think I have to read it a few more times with a lot of practice on the side. The RSI reversals I found particularly interesting.
So when I stumbled across this very analysis on the USDNOK I found the detailed explanation very helpful. On top of that I saw in other threads that you use the RSI reversals or divergences as well and are familiar with Connie Brown's work. So now I've started reading up on your older posts to see if I can learn more about your way of analyzing which hopefully can help me to become a better trader.
Thanks again for your elaborate explanations!
4xForecaster
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Thank yu @plok for following my analyses. If there is any topic of interest, I suggest to Google it using the topic and including 4xForecaster + David Alcindor ... This will likely open up several pages on the subject.
Regarding negative reversals compared to bearish reversals (and positive/bullish), you will see that I have been advocating this crucial difference for many years. I started to trade in 1997, and since then focused my interest in RSI's discreet signals. Connie has used hers from Mr. Andrew Cardwell (a former student of Welles Wilder, author of the RSI), whereas I studied RSI independently and came across a former student of Cardwell's lesson who plagiarized the lessons (according to Mr. Cardwell) into a little red book.
I also tried to contact Mr. Welles Wilder himself (first, as a member of his Delta Society - See: DeltaSociety.com, then by calling the number off of the site, but was informed that Mr. Wilder could not be joined for any market-related topics any more). My subsequent discoveries of the RSI go well beyond what Wilder had shared, or what Cardwell has been teaching, and represent a core component of my Predictive/Forecasting Model.
David
plok
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Thanks for your insights David and I fully agree with CryptoChartist.
I'm closely following NOK and trying to learn to trade it, but I find it very difficult to make a decent analysis with the huge movements the NOK is making. Guess this is not the ideal currency to learn the tricks of the trade...
4xForecaster
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Thank you @plok - Looking at NOK - or any widely-moving Forex pairs - I recommend to look at their correlations with EUR and say JPY, where the base currency (USD, EUR and JPY) have significant activities ... Oil has been a major influence on the USD vs. NOK, and the target I defined for WTI last February 2015 remains in sight at 21.01 - See following chart (click to link to analysis):
I would expect price to continue to rise based on this commodity.
On a pure geometric basis, I would keep an eye on the 5-prime level, coming to definition along the dashed line off of Point-3. Very often, a single validation won't do, and instead, price would continue to carve higher highs using this line as a backdrop ... Again, the USD vs. NOK will provide the most rational indication of a reversal, where oil would rally and thus bring the USDNOK down.
Thank you so very much for your readership - It is much appreciated. Feel free to refer friends and colleagues to this and other analyses. If you have specific trading questions, feel free to post them here, and I will do my best to answer - If I know a better trader or site, I should also refer you there.
Best,
David Alcindor
plok
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Sorry for the late reply, I'm not getting email notifications even though the settings are correct...
I have gone through your WTI analysis as well as the USD/CAD WW vs. Geo and I must say that you do an impressive job. Especially with all the updates, detailed road maps and explanations along the way this becomes a valuable source.
It's the EUR/NOK I am trying to trade. Actually what I'm trying to do is to protect the assets I have in Norway (NOK) against depreciation as I live in The Netherlands (EUR). I try to do this by selling EUR/NOK put options to dampen the NOK depreciation as much as possible. I'm selling puts because that's a bit more 'forgiving' than regular FX trading, and if the price moves against me completely then at least I still have the underlying asset in NOK that appreciates to compensate the loss on the puts. It's probably not the most efficient strategy, especially since it's OTC products, and also because I miss any large moves. It's a bit like selling a covered call option on a stock you own. I haven't been able to come up with something better yet...
I'm keeping a close eye on Oil which can indeed be used as a proxy and will probably be the key to a possible reversal at some point in the future. But I'm also trying to follow USD/NOK and to a lesser extent also NOK/SEK and USD/CAD.
On the correlations, this can be quite difficult. I saw the EUR weakness coming when the EUR/USD was still >1,30 and assumed that it would weaken against the NOK as well, but instead it strengthened by approx. 20%!
With 5-prime level, you mean the level where the price would hit the extended 1-3 line (currently around 8,73)?
If price carves out a 5', then the highest probability move is price reversing to the level of Point-4.
The Geo works out as a compensation of price movement against a geometric baseline. So, any adverse excursion (i.e.: distortion from the baseline 1-2-3-4 points, which occurs via point-5) will cause price to adjust accordingly ... Hence the Geo's three Off-Set Rules:
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Off-Set Rule #1 - If price reverses from Point-5, the highest probability target rests along the 1-4 Line (same as the Wolfe Wave completion)
Off-Set Rule #2 - If price reverses from Point-5', the highest probability target rests at the price levels corresponding to Point-4
Off-Set Rule #3 - If price reverses from Point-5'', the highest probability target rests at the price levels corresponding to Point-3
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You do an amazing job at communicating your message with visual support. This is fantastic, I don't think this community can thank you enough.
Thank you for the education!