GbpNzd: It's As Simple As That
Look at the weekly chart of GbpNzd below, what can you see?.
The sell off from 3.7 to 1.75, a 19500 dip from 2000 to 2013. Is it a price movement in correction or motion (trend) ? Is the subsequent bullish move from 1.75 a correction of the bearish trend or continuation of the bullish trend?
All these questions can be answered by elliot wave theory.
Let's look at the following scenarios.
Let's consider the sell off as a bearish trend.
This is a very clear 5-wave decline and a rally followed immediately. According to elliot wave theory, a 5-wave will be decline will be followed by a 3-wave advance.
After the first rally, price is expected to retrace downward before advancing further to break the resistance trend line.
The chart below shows the second scenario
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The sell off could be seen as a long term double zigzag correction. Wave W = Wave Y which is a common ratio in zigzag corrections. Price will validate this wave analysis by moving higher and break the 3.7198 resistance in a very long term. The time taken by price to recover the sell off should be about two-third of the sell off time.
The two charts above are advocating for more bullish move; the first as a trend and the second as a correction.
What IF price, responds more to the strong resistance and falls further to break 1.7522 low?. Elliot wave has something for that in the chart below.
The long term decline is seen here as the completion of the first 3-waves of an expected 5-wave impulsive move.
According to elliot wave, the 4th wave should not trade in the region of the 1st wave. The 4th wave is bouncing off that region, thereby making this count stand.
The horizontal and diagonal resistance could be too strong to be broken upside. Price could continue to move downward in a new journey and the next target will be 1.6240 (0.618 x wave 1) or deeper, but should be above 1.2 region ( region at which wave 1= wave 5 ).
This wave count will be invalidated if price breaks above the resistance.
If price breaks below 1.62412, there is high tendency that the recent bullish move and the subsequent bearish continuation are parts of the larger term wave 3.
Wave 3 is known to usually be the strongest, so this count will support that. Price must stay below the trend line.
Price is expected to dive to 1.37 which is a strong fibo-confluence zone.
Price will, to a great degree of certainty, validate one of these forecasts. Are we to be confused by these forecasts. Capital NO.
This is an information in our hands. Elliot wave theory has helped us with varying ways of seeing possible price movement.
Anyway price moves, we understand the language and adjust with confidence.
How do we profit from this? We simply look for the completion of elliot wave tradable patterns in the lower time frames that goes well with any of these analysis, set a profit and get out.
We don't have to trade the forecasts, we simply trade the patterns.
I'm already in a sell position from 2.3677 , targeting 2.3000 due to a pattern I recognized in the hourly charts.
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