Expanded flat correctionHello guys
We have two corrective waves which are A and B. And we have one motive wave which is C.
In most cases wave B and C are breaking through the lines and this is common.
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Expandedflat
EW ANALYSIS: Ethereum Just Finished An Expanded Flat CorrectionHello Crypto lovers! Let's talk about Ethereum!
Well, just like Bitcoin, even Ethereum made sharp and impulsive five-wave rally at the end of December in 2018. And such sharp legs usually indicate a reversal, at least for a bigger correction of a higher degree!
So, after that impulsive leg A/1, ETHUSD dropped into a wave B/2 correction, which we see it as a big expanded(irregular) flat pattern! Flat corrections are made by three legs into wave "a", three legs into a wave "b" and motive wave "c" should be completed by five waves. And, as you can see, Ethereum made a clear 3-3-5 expanded flat correction back to ideal 61,8% - 78,6% Fibonacci retracement and 100 support area!
That said, we believe that Ethereum can be ending a big a-b-c expanded flat correction here in wave B/2, from where we should see a bounce back to highs for a wave C/3. So, if ETH turns sharply back above 120 region, then we may start considering bullish scenarios. However, ETHUSD may go even more complex here, so as long as it's moving above 80 invalidation area, we will remain bullish!
Disclosure: Please be informed that information we provide is NOT a trading recommendation or investment advice. All of our work is for educational purposes only.
Catch Me If You Can: Breaking Down the Elusive Elliott WaveHere's an explanation why Elliott Waves don't work most of the time, and then sometimes work perfectly.
Lets take a closer look at a single impulse wave up and its correction (I'm using 61.8% retracement and wave 3 = 100% of wave 1). You simply can't trade based on that (red dots), here's why.
If you treat it as 123 up trend forming (green count), you can't confidently:
1. short at the end of 1 to catch wave 2 because it can go higher (have an extension from 100% to 127.2%, 161.8% and 261.8%)
2. long at the end of 2 to catch wave 3 because it can go lower
- from 23.6% to 38.2%, 50% and finally 61.8% and then go up for the up trend 123
- up to 88.6% of wave W in wave X and then go up in Y (if this is X not 2)
- and even lower after that, break the start of wave 1 to reverse the trend down
3. short at the end of wave B (red) after a bounce from wave 2 to catch wave C (red), because it can go higher
- it can go up from 23.6% to 38.2%, 50% and finally 61.8% of prev swing wave A (red) and then bounce down as zigzag or triangle
- it can retrace as wave B (red) in a flat up to 88.6% and then go down still
- or it can even be an expanded flat wave B/X and retrace up to 138.2% of wave A (38.2% above the end of wave 1, Sometimes even 61.8%! and only then drop down)
- or it will go up in wave 3/Y = 100% of wave 1/W
4. long on breakout of the end of wave 1 to catch wave 3 because it can pullback
- it can be wave a of Y or lower degree iii or 3 and immediately pullback in b/iv below wave 1
- it can be an expanded flat wave B/X and retrace from 105% up to 138.2% of wave A (38.2% above the end of wave 1, Sometimes even 61.8%! and then drop down)
- it can be a short Y = 61.8% of W in WXY and then go down
That's why you are only supposed to buy on a retest of wave 1 after the breakout
5. long at the end of wave C (next bounce from the end of B) (red) because it can go lower
- it can become a triangle ABCDE and break the other way
- it can still be wave B and go higher up a bit then down in zigzag/flat (same impulse-correction fractal of a lower degree, same options, see #3)
- it can break the end of wave 2 and continue down as wave C from 61.8% up to 1.618% of wave A, although we mostly have short C = 61.8% of A in Bitcoin
So, on the long side you are left only with 2 not-so-tradable options:
- buy above 138% of wave 1 to ride a very small ~10% (100% - wave B retracement - 38%) chunk of wave 3 = 100% of wave 1.
However, the expanded flat can still go to 161.8% and wave 3 can end early at 61.8% as wave C/Y.
And if not that, this trade probably has a bad R/R and you will pay in fees a lot more that you possibly can gain.
- buy on retest of wave 1/A/W in iv/x after the breakout to ride wave 3/C/Y (100% - wave 2/B/X retracement) up to 38.2% in case of an expanded flat or up to 100% of wave 1 in case of wave 3/C.
And you can only to the 2nd option on the short side, because usually C = 61.8% of A, not 100%, invalidating the first setup.
But guess what, that's called trading breakouts from a range/triangle, and you don't need Elliott Waves for that.
Conclusion:
I just showed you that in most cases Elliott Waves don't really work, they give you a number of possibilities for both bull/bear cases, not trend direction.
You can't trade based only on Elliott Waves and fibs, without using other TA methods.
The trend is basically just a sequence of 2 impulses and then comes a wave 4 which can become the 1st impulse down and reverse the trend or go up in wave 5. Waves 3 and 5 are not guaranteed. The only thing guaranteed is a 2nd impulse following the 1st. But in the current market with unclear 3/5 wave structure, low liquidity, hidden bottoms and traps you can't clearly spot even the 1st impulse, so there might not be a 2nd one.
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