Todays trading brought prices to meet the upper trend line of the primary wave ‘4’ triangle, with this action we can say that wave ‘d’ up is possibly finished at todays high.
A triangle in Elliott wave terms should consist of 5 internal waves, and the DOW as labelled in the chart above, has completed 4 of the 5 waves. This offers a decent opportunity to trade the expected decline in wave ‘e’. Wave ‘e’ is the first high confidence trade setup that a triangle offers as the trend line is firmly set with two previous lows and two previous highs in place.
I am now setting up to take advantage of a sharp fall in wave ‘e’ which might extend downwards to touch the lower trend line, thereby completing the triangle. A possible target would be the 15700 area, this price drop would complete the triangle nicely in terms of the look of the triangle and reach trend line support.
And a nice 1800 point opportunity, if it comes to pass.
We should now wait for some confirming price action to add to our confidence level and also offer a nice tight stop for the trade setup.
Entry
Ideally an initial impulsive decline away from the trend line followed by a slight corrective recovery to a lower high on an hourly chart, will give a definite sell signal and we could use today high as our stop. Tomorrows action might allow for this setup to take place.
The high today is 17652 and the close is 17585 That gives a 67 point stop loss at todays close should that high stay in place.
Spread bet trade setup:
Date: 03/22/2016
Market: DJIA
Trade: Sell Stop
Price: 17582
Stops above: 17652
Target: 15700
Stop Loss in Pips: 70
risk/reward: 70/1700
To learn more on how to use this techniques, please refer to my Elliot Wave article
Trading in Forex Exchange Market is VERY SPECULATIVE AND HIGHLY RISKY and is not suitable for all members of the general public but only for those investors who: (a) understand and are willing to assume the economic, legal and other risks involved. (b) Taking into account their personal financial circumstances, financial resources, life style and obligations are financially able to assume the loss of their entire investment. (c) Have the knowledge to understand Forex Exchange Market and the underlying assets.
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