A with lessons and demonstrations offered over the past 24 hours (See $USDTRY, $NZDJPY, ... etc), here is another pair worth looking into, not so much from the perspective of a pending geometric completion, but as an example of developing a contingency plan.
Here, we are contemplating a short (green scare representing a conservative, prudent entry point, where price BACA < 1-3 Line as its signal) As the Wave/Geo would have it, targeting the 1-4 Line comes to sight, and this would be the right thing to consider at this point.
However, there is a slight possibility that Point-5 of the completed geometry might in fact be a dud, and that instead, the higher-high structure that build atop this point may perhaps represent the residence of Point-3, of a larger geometric system.
As a cautionary measure, I would here recommend the trader to look for added confirmation, such as breaking below prior higher lows (for instance, the one at 8.45, and the one slightly above 8.40), with perhaps partial positioning if that fitted your risk tolerance or strategy style) - See following illustration:
Another typical price behavior worth waiting for is the conversion of the 2-4 Line from a support-to-resistance, which means that price would retrace from a decline and hit the underbelly of the formed geometry, offering a validation signal to go short - See suggested dashed pathway in following illustration:
In any case, figuring out reasonable and sound price behavior ahead of the game is likely to remove some of the uncertainties that come with this and any other markets - For instance, there still remains the uncertainty whether this pair will ignore the completed geometry, and instead internalize it into a large system. Yet, for this scenario, there is already a contingency plan awaiting in the background, using the Geo's internal construction rules (see prior lessons).
See you on this or other revealing threads.
Predictive Analysis & Forecasting
Durango, Colorado - USA
Here is one example illustrating what happens when the operator (i.e.: me, in this case) ignores the rules of the Predictive/Forecasting Model ... The price continued downwards. Had I stay in tune with the fact that the WL was breached, I would have gone up from H1 by a factor of four, or H1 x 4 = H4 to realize that there may have been more legs to the downside.
So, turning back to the H4, here is what the Predictive/Forecasting Model defines as the lower targets ... note that we are now closer to the WL Line belonging to H4, and that we are brushing the TG-Lox target as well:
This pair has been quite reliable as it hit all Qual-Targets, and remains compliant to the nature of these qualitative targets, which is to define tip-top (TG-Hi and TG-Hix) and bottom-tip (TG-Lo and TG-Lox) reversal levels. As shown in the M60 chart, a reversal has been reach in the vicinity of these Qual-Targets, and we are now turning to a finer grain level - M15 - and see where this may lead us, using a combined application the of Predictive/Forecasting Model (se new target just defined above as TG-1, a Qual-Target, and not a Quant-Target, hence defining a level of retracement, and not reversal, in contrast with the Qual-Target), as well as advance geometry with the Geo, wherever it appears appropriate:
A quick note on the EAGLE strategy, which represents an (E)xtremely (AG)gressive (L)evel of (E)ntry - I am using this level to enter a LONG position, and seek exit at the TG-1, defined in the chart - Note that the TG-1 resides in a cluster of targets from a prior analysis, adding reassurance to this personal trade consideration.
This and any other comments are for pure educational purpose and not a trade recommendation - I am not a certified market professional, so turn to your own experience and due diligence before giving up your capital to cunier-than-thou breeds of trader.
Current price action is a correction, fashioning the end of recent bearish impulse. Look for internal 4th and 5th waves at that level, pushing Point-4 of the geometry to a lower level at a decelerating rate - Point-4 is the important level in the geometry that defines the 1-4 Line, as well as the most common Geo's Off-Set Rule level of attainment. So, there is no need to trade the chart whose Point-4 remains undefined - However, one should pain close attention to internal wave developments, such as the current correction that followed the vertical bearish impulse, as we know that a 4th way of correction, followed by a 5th bearish impulse will signal the approaching end of a larger swing ... Of course, wait for the a-b-c connection where a reversal of trend by the expression of a bullish impulse would likely have to occur with this transitional correction as well:
$SEK completes a POSITIVE divergence (not "bullish" divergence!); Price rests on significant 1-4 Line:
An important take-away in this and ANY other chart carrying this RSI configuration:
1 - Bullish divergences are associated with DOWN-trending markets, representing a pause as price decline, despite it being called "bullish divergence"
2 - Positive divergences are associated with impending rallying in price. Best is to see a narrow divergence, counting 5-8 bars/candles.
This is not MY rule. It's the rule of the RSI: Know what to expect versus what tis intended out of the market. In other words, the former creates a mistaken expectation with much false positive signals, whereas the latter expresses a directional intention.
Regrettably, people continue to post divergences and illustrate them when one finally occurs. Truth is, it takes SEVERAL of the WRONG divergences (i.e.: "bullish" or "bearish") for a price to finally move in the expected direction. In contrast, it typically takes only ONE of the RIGHT divergence for price to move in the intended direction.
There are several sources of information on this subject. Simply Google and compare the two terms to find out more from other sources as well, so you realize how widespread this mistaken has been perpetrated.
1 - In the case of a Negative Divergence ("ND"), look for RSI rising "atop" price, as if RSI was "hammering" the next lower low spike in price, and driving the nail DOWN.
2 - In the case of a Positive Divergence (PD), lok for RSI "shoveling" price UP by pushing it up from a higher-low to a higher-up level.
The "Hammer" for NDs and "Shovel" for PDs are the analogies I have been teaching - I hope this makes sense after a while. Don't expect it to make sense right away, as you might need some time to "rinse" your brain of learned methods that remain erroneous - not to me, but as was intended by the real application of the RSI and its divergences: Positive/Negative, not so called "bullish" or "bearish". Yeah, I know, I get yelled at by some who love to hold on to institutional teddy bear-like newly minted knowledge, but I am simply passing the knowledge along, not claiming authorship on this and most other things I share.
Interesting reads on this:
John Hayden - Ultimate Guide to RSI
Andrew Cardwell - http://www.CardwellRSIEdge.com
I have not taken a course from Mr. Cardwell, but I did read John Hayden's book - I once tried to share some new discoveries on RSI, but all I heard back from Mr. Cardwell was that Mr. John Hayden "plagiarized" his course as a student of Cardwell's course. I then tried to contact Mr. Welles Wilder through a society (www.DeltaSociety.com) I had joined by purchading the material (too weird for my geometric mind to grasp), but when I called, I was informed that Mr. Welles Wilder did not wish to be contacted about RSI a-ny-more.
Yes, I was sad.