Low Risk, High Reward Trading Experiment

Wednesday February 14 data releases (cont.)

16:45 NZD Retail Sales m/m http://www.forexfactory.com/images/m...mpact_high.gif 0.7% 0.7% -0.2%

18:50 JPY GDP q/q (p) http://www.forexfactory.com/images/m...mpact_high.gif 1.2% 0.9% 0.1%
18:50 JPY GDP Deflator y/y http://www.forexfactory.com/images/m...act_medium.gif -0.5% -0.5% -0.7%

19:01 GBP RICS House Price Balance http://www.forexfactory.com/images/m...impact_low.gif 28% 34% 37%

19:30 AUD House Price Index q/q http://www.forexfactory.com/images/m...impact_low.gif 0.9% 1.8% 2.2%

Yen Firms on Data

Japan’s Q4 GDP sharply exceeded market expectations, propping both the yen and yields of JGBs higher in early Tokyo trading. Consensus estimates were anticipating fourth quarter growth of 3.8%, instead the data revealed that the economy experienced robust annualized growth of 4.8%. On a quarterly basis, the economy expanded by 1.2%. Japan’s growth rate was its strongest in 3-years, raising market expectations for an imminent Bank of Japan rate hike – as reflected by higher bond yields.

The Bank of Japan meets to deliberate monetary policy next week and it remains unclear whether the BoJ will lift rates past its current levels at 0.25%. What is clear though is, if the Bank of Japan refrains from tightening policy further even with a robust Q4 growth rate of 4.8% -- surpassing that of both the US and Eurozone, speculators will aggressively attack the yen and we can expect renewed criticism from European officials.

Japanese Economics Minister Ota reiterated the softer aspects of the nation’s economy, highlighting the persistent weakness in consumption as well as in average wages. Also, Ota said that the end of deflation was in sight – which suggests that he is not fully confident Japan has defeated deflation. He expressed his expectations for the BoJ to support the economy with monetary policy. We’ll likely receive further jawboning from government officials leading up to next week’s policy meeting amid growing dissent toward a rate hike.

Result: USDJPY had already been dropping since February 11 at 17:30 ET at 122.10 by 135 pips down to about 120.75 at the time of the February 14 JPY GDP data release. The strong GDP data caused (or helped) the price of USDJPY to fall quickly another 95 pips to 119.80. As of 14:00 ET on February 15 USDJPY reached a low of 119.35, which could be the bottom of this trend.

Thursday 2/15
4:30 GBP Retail Sales m/m http://www.forexfactory.com/images/m...mpact_high.gif -1.8% 0.2% 1.1%

This is favorable for our Trade Experiment #343B Sell GBP/USD at 1.9640

Stop is 1.9681

Target is 1.9400

Thursday February 15 at 4:30 ET

Trade Experiment #344 Sell EUR/JPY at 158.00

Stop is 158.31

Target is 157.00

Risk is 34 pips

Reward is 97 pips

RRR is 2.9 to 1

Confidence level: good
Accuracy: good
Reward / Risk Ratio : fair

For research purposes only.

Wave hypothesis : Wave 5 down of Wave C down of Wave 4 down.

p.s. - Successful trade. The target was met at 11:00 on February 15, 2007. The recent low is 156.84, 16 pips lower than our conservative target. The downwards trend is nearly over. EUR/USD fell slightly today (50 pips), while USD/JPY fell strongly (100 pips).

Thursday February 15
4:30 GBP Retail Sales m/m http://www.forexfactory.com/images/m...mpact_high.gif -1.8% 0.2% 1.1%
5:00 CHF ZEW Expectations -17.3 _________-10.8
6:00 EUR ECB President Trichet Speaks
8:30 USD Empire State Business Conditions Index http://www.forexfactory.com/images/m...mpact_high.gif 24.4 10.5 9.1
8:30 USD Import Price Index m/m http://www.forexfactory.com/images/m...act_medium.gif -1.2% -0.2% 1.1%
8:30 USD Unemployment Claims 357K 314K 313Kr
8:30 CAD Manufacturing Shipments m/m 1.7% 0.6% 2.4%r
9:00 USD TIC Report http://www.forexfactory.com/images/m...mpact_high.gif 15.6B 60.0B 84.9Br
9:00 USD St. Louis Fed President Poole Speaks
9:15 USD Industrial Production m/m -0.5% 0.0% 0.5%r
9:15 USD Capacity Utilization Rate 81.2% 81.8% 81.8%
10:00 USD Fed Chairman Bernanke Speaks http://www.forexfactory.com/images/m...mpact_high.gif
12:00 USD Philadelphia Fed Manufacturing Index 0.6 3.5 8.3
13:00 USD NAHB Housing Market Index 40 35 35
18:50 JPY Tertiary Industry Activity Index m/m -0.4% -0.1% -0.3%

The EUR and GBP rose against the USD after US treasury capital flows (TICS) declined sharply from $84.9 billion to 15.6 billion in December - after the data came out at 9:00 ET today. Including short-term securities, investors sold a net $11 billion. Following the report, the EUR/USD rose 40 pips from 1.3130 to a peak at 1.3170, and the GBP/USD rose 60 pips from 1.9560 to 1.9620 where it peaked out and then resumed its downtrend set in motion earlier apparently by the soft UK Retail Sales figure at 4:30 ET. However, there is no sufficient evidence to show investors tend to diversify their investments from US assets just based on this TICS report. This huge drop in the purchasing of US securities may result from money managers' window dressing before year-end.

Except New York manufacturing data ( Empire State Business Conditions Index ), all numbers from US today were worse than expected, weighting on the dollar. But the GBP/USD downtrend continued in spite of the negative US data. Empire Fed manufacturing index rose from 9.1 to 24.35, indicating the manufacturing activity expanded in New York. Capacity utilization fell from 81.8% to 81.2% in January. Industrial production unexpectedly dropped 0.5% following a 0.4% growth in the previous month. Another manufacturing data, Philadelphia Fed index, fell from 8.3 to 0.6 in February.

The GBP/USD downtrend resumed after Fed Chairman Bernanke said the economy may be stronger than some expected in his congressional testimony at 10:00 ET. EUR/USD remained range bound between 1.3125 and 1.3170 all day.

Japanese GDP printed at 1.2% versus 0.9% projected as Japanese economy grew at the fastest pace in 3 years. Fueled by the longest corporate expansion in 30 years the Japan’s GDP expanded at a 4.8% annual rate – far better than consensus estimates of 3.8% growth. Furthermore nominal prices climbed 5% - faster than even the headline GDP number. The news stoked speculation that BOJ will now have ample economic ammunition to raise rates 25bp at its meeting next week. Many analysts believe that this will be the central bank’s last chance to do so before parliamentary elections scheduled for June. Traditionally Japanese monetary authorities move to the sidelines during campaign season.

However, as if on cue, Japanese politicians, specifically the powerful LDP Policy Chief Shoichi Nakagawa quickly chimed in with yen dovish rhetoric stating that the recovery remains fragile and that the GDP data does not suggest any pronounced change for the better over the past month. Whether the BOJ will once again succumb to political pressure and stay pat remains to be seen. In the meantime the yen rallied against the greenback and on the crosses hitting 1 month highs as traders adjusted to the possibility of another rate hike.

The target of 235.25 for Trade Experiment #335 Sell GBP/JPY at 238.30 of February 8, 2007 was met 5:00 ET on February 15, one week later. By then the conservative target would have been adjusted to 234.30, about 100 pips lower. The actual low is 233.10 so far, with one more downwards pulse expected.

p.s. - One more pulse is underway, and the recent low is 232.90. The bottom is near.

p.p.s. - The "one more pulse" finished at 232.50, which could be the ultimate low. A viable 5 wave pattern in the last downwards mid-sized wave is evident. But it could also be 1-2-3 instead of 1-2-3-4-5, which means that we will have another pulse downwards before this trend is over. We could also see a failed fifth wave, which will create a double bottom.

p.p.p.s - There was one more pulse down to a low of 232.40. This could be the ultimate low, or we could see one more wave down.

The general wave hypothesis was apparently correct.
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Previous Trade Experiment and Prediction:

Friday February 2 at 0:00 ET

Change entry price for Trade Experiment #335 Sell GBP/JPY at 237.80 to 238.30 from 237.80.
Change stop to 239.11.
New risk is 90 pips
New reward is 246 pips
New RRR is 2.7

For research purposes only.

Wave hypothesis : Wave 5 down of a larger Wave C of an even larger Wave 4. (Traex, I see a 1-2-3 where you see 1-2-3-4-5, but it's messy!)
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Previous Trade Experiment:

Thursday February 1 at 14:15 ET
As SeekingLight asserts above, GBP/JPY has seemingly completed an upwards fourth wave correction.
Trade Experiment #335 Sell GBP/JPY at 237.80
Stop is 238.26
Target is 235.25
Risk is 55 pips
Reward is min. 246 pips
Reward / Risk Ratio is min. 4.5
Confidence level: good
Accuracy: fair
Reward / Risk Ratio : fair
For research purposes only.

Wave hypothesis : Wave 5 down of a larger Wave C of an even larger Wave 4.
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Predictions for today - Friday February 2

GBP/JPY will rise to hit our entry price on a short trade (above) of about 238.30 - 238.80. (The current price is 237.60) Actual high was 238.50, previous to NFP report, 238.79 after report.
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Update GBP/JPY for Saturday February 3
Saturday February 3 at 2:00 ET

The current price of GBP/JPY is 238.05. It should fall to about 237.85 then rise to complete the wave 5 (at about 239.00) of the Wave C of the Wave 4 of the larger downwards Wave C of the very large downwards WAVE 4.

Then GBP/JPY will drop in a fifth wave of the C Wave approximately 465 pips from 239.00 to 234.35. "Note that my targets are approximate, conservative estimates. As we approach them the greater information available can allow us to firm up our estimates."

Thursday February 15 at 16:00 ET

Trade Experiment #345 Buy USD/JPY at 119.18

Stop is 118.79

Target is 122.50

Risk is 44 pips

Reward is 328 pips

RRR is 7.5 to 1

Confidence level: good
Accuracy: good
Reward / Risk Ratio : excellent

For research purposes only.

Wave hypothesis : Wave 5 up on a daily chart.
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USD/JPY is at 119.16. It is very near to the bottom of its recent 122.08 to 119.16 -- 292 pip drop. It is due for a correction, not reversal of trend direction.

USD/CAD is at 1.1625. It is very near to the bottom of its recent 1.1875 to 1.1620 -- 250 pip drop. It is due for a correction, not reversal of trend direction.

USD/CHF is at 1.2340. It is very near to the bottom of its recent 1.2550 to 1.2330 -- 220 pip drop. Upwards target us about 1.2450. After the Wave 4 upwards correction we foresee a fall to 1.2280.

GBP/JPY is at 232.66. It is very near to the bottom of its recent 238.89 to 232.66 -- 623 pip drop.

EUR/JPY is at 156.64. It is very near to the bottom of its recent 158.75 to 156.64 -- 211 pip drop.

Thursday February 15 at 17:00 ET
USD/JPY has descended to 119.16 today, and may even go a but further before reversing. But it went up to 122.10 from the price of about 120.50 on February 4 when you posed this question, before going down here. Long term price targets are only useful for position traders who hold positions for long times. The return on capital from this style of trading is comparatively low.

Thursday February 15 at 18:00 ET

Trade Experiment #346 Buy USD/CAD at 1.1616

Stop is 1.1588

Target is 117.70

Risk is 33 pips

Reward is 149 pips

RRR is 4.5 to 1

Confidence level: fair
Accuracy: good
Reward / Risk Ratio : excellent

For research purposes only.

Wave hypothesis : The first wave down is now finished. We will have a corrective upwards Wave 2 now. This is not an optimal trade. It will be much better to trade the third wave down from the top of the Second Wave.

nice wow

Itme,
I have been read your thread for awhile now. I'm still trying to count the waves. But my problem is where to start looking and what time frame should I start from. Could you educate me.

Edlo

Hi Edlo. Read the thread on the Basics of Elliott Wave linked at the bottom of this message. Then count the waves on the one day / 10 year chart. Keep practising - like learning music. This is the best approach to begin with. Once you find a good set-up, then refine the entry price with the one hour and 5 minute candlestick charts.

Itme, do you not think GBP/USD could retrace back up to 1.9570 or higher tomorrow before continuing downward?

Yes, that is possible, but I predict a rise in GBPUSD to just 1.9555 before the fifth wave down of an extended downward wave 3 occurs.

EURUSD seems to be headed up to about 1.3155 - 1.3160 before it does a Wave 4 correction down to about 1.3050.

Friday February 19 Economic Data Releases:

2:00 EUR German CPI m/m (r) http://www.forexfactory.com/images/m...act_medium.gif -0.2% -0.2% -0.2%
2:45 EUR French Nonfarm Employment Change q/q 0.2% 0.2% 0.2%
3:15 CHF Retail Sales y/y 9.2% 2.5% 3.3%
5:00 EUR Trade Balance 2.5B 3.2B 4.5B
8:30 USD PPI m/m http://www.forexfactory.com/images/m...mpact_high.gif 0.2% -0.6% 0.9%
8:30 USD Core PPI m/m http://www.forexfactory.com/images/m...act_medium.gif 0.2% 0.2% 0.2%
8:30 USD Housing Starts http://www.forexfactory.com/images/m...act_medium.gif 1.41M 1.61M 1.64M
8:30 USD Building Permits 1.57M 1.59M 1.61M
10:00 USD Consumer Sentiment (p) http://www.forexfactory.com/images/m...mpact_high.gif 93.3 96.5 96.9

Congressional testimony by Fed Chairman Bernanke has proven to be a bad omen for the US fundamentals this week (Details here: http://www.forexfactory.com/showthread.php?t=18116 ). After flat retail sales growth reported on Wednesday, Thursday's shrinking industrial production and weaker than expected capacity utilization - economic factors closely monitored by FOMC - have also disappointed dollar bulls. Furthermore, waning appetite for USD based securities as measured by the TIC report took the markets by surprise with a sharp shortfall in financing the rising US trade deficit. Today's US data is not projected to give any reprieve to the souring sentiments concerning the future of the US economy, with housing starts anticipated to resume a decline and producer inflation rate expected to offer more evidence of containment in accordance with Chairman Bernanke's assessment.

Friday February 16 at 4:15 ET

Trade Experiment #347 Sell EUR/GBP at .6736

Stop is .6767

Target is .6530

Risk is 34 pips

Reward is 203 pips

RRR is 6.0 to 1

Confidence level: good
Accuracy: good
Reward / Risk Ratio : excellent

For research purposes only.

Wave hypothesis : Large wave down - Wave 5 of a larger WAVE 5 on the one day chart.
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Previous comments and successful trade experiment:

Thursday January 18 at 3:30 ET

EUR/GBP has descended to .6554 and is also showing signs of nearing its bottom. [Actual low is .6536.]
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Wednesday January 17 at 13:00 ET

When GBP/USD is ready to reverse and start down, then EUR/GBP may be at .6550 or maybe .6480.
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Friday December 29 at 16:00 ET

Trade Experiment #299 Sell EUR/GBP at .6747
Stop should be .6766
The first target is .6695
The second target is .6650
Risk is 22 pips
Reward is 49 / 94 pips
Reward / Risk Ratio is 2.2 / 4.3

Confidence level: good
Accuracy: good
Reward / Risk Ratio : fair

For research purposes only.

Performance of above experiment: actual high was .6761, 14 pips higher than the entry price, and the ultimate low was .6536, 114 pips lower than the second target.

GBP/JPY finally completed its corrective wave? We're never sure of it tho. Just my opinion.

PS Broke the wave count chart into 2 parts because the corrective wave is very long!

Chart part 2 lol.

You haven't convinced me, but thanks for trying, Traex! First of all, dividing a wave chart into two parts is not a good idea in my opinion. You can't see the pattern properly, and EW is all about patterns. Secondly, I don't understand what aspect of EW theory you're employing. If this is a corrective wave, according to my understanding, it is comprised of an A down, a B up, and a C down. Period. The A down is 1-2-3-4-5. The B up is a-b-c. The a in the B is 1-2-3-4-5. The b in the B is a-b-c. And the c in the B is 1-2-3-4-5. The C down is 1-2-3-4-5. If you can show me a viable corrective wave count with reasonable proportions of size and time that complies with the above count and structure, then I will be convinced. A-B-C-X-A-B-C is not something I know anything about. I know that there are many elaborate Elliott Wave patterns that some theoreticians have hypothesised. In my opinion, they are mostly in error, due to their fastidious adherence to "The Rules". Those who fastidiously adhere to man-made "rules" find that many patterns deviate from these norms, and then they sometimes invent various other "patterns" and "counts" which in my opinion are non-existent.

Personally, I think we're in the Fifth Wave of the C wave down, and in the fifth wave of that wave, and about to see the fifth wave of that wave down, targeting about 231.80. The current price is 232.50.

Since it appers there has been willingness to post the chart and counts and more importantly discussing them, I would like to attempt to post mine. I cannot say that I use 10 years of back data, therefore based on ITME method my counts are not as accurate or as complete (I am not sure if one always has to come back to 10 years to make any counts adjustments, I rarerly revisti and readjust my monthly and wekly counts).

So please review and tell me if you have any comments. Based on ITME post that he is favoring move down from 9550 area, I can see that we are not in agreement. My assumption based on all the charts below thta we have completed a corrective A Wave in a weekly chart, ABC correction that followed with Wave 1 and 2 and starting wave 3 on the daily, 4HR supports the view identifying the reversal within a pip at 78% retracement of the upward wave 5 swing and on the other site breaking a lower trend line and 78% retrace signifying a swing in direction and continuation of movement up. Hourly chart does support this assertion as well.

Therefore based on the charts, I can see that the market can move beyond 9750 area withing next 1-2 weeks for wave 3.

Do not know how it would fit in ITME counts but hope ITME could comment clarify since I cannot see his charts

Best Regards

hi item,

I need your comment plz

MY trade EUR/USD AS WAVE..

BUY @ 1.3124
STOP 1.3112
TAKE PROFIT 1 1.3158 RISK/REWARD RATIO 2.5 OK TO TRADE.
TAKE PROFIT 2 1.3178 RISK/REWARD RATIO 4.2 OK TO TRADE.
TAKE PROFIT 3 1.3212 RISK/REWARD RATIO 6.7 OK TO TRADE.

IAM LONG EUR/USD

THANKS.