Plan the Trade

Posted this over yonder, so i guess it's only right to have as reminder on here.

CL earlier this evening;



123 off of the 50% fib retracement. Part position closed to lock in +30, stop to BE on the rest, in case that was only wave 'a' short (of 'B'), but expecting fresh high for 'C' wave long tomorrow.

Update to above, as suggested, higher in C wave today. First target was 3990, thus second half closed for +200, secondary target is 4044, but enough already for a blinder of a trade;

Gonna have to drastically change my outlook for Dow i think. I only feel compelled to try and correct my views because of previous postings on longer term charts. I think the 5 wave expanding diagonal that ended a week ago could have been the top of this cycle.

For some reason i was thinking of it being a 5w move, but the previous long cycle, (Aug - Nov), was clearly in 3w.

I'm not going to try to list or draw all possibilities, because there are too many in my mind right now, however, i still prefer the idea of the wedge on the daily.
Previously i had drawn the start line off of the start of the move, but this is not correct in any case. The top trendline of a wedge is drawn off of the top of waves B&D.

Lets add a couple of charts to explain. First the previous;



readjusted slightly at cycle short end;



So now you can hopefully understand my meaning. The top TL has no relevance, because it should be drawn from tops of waves B&D, thus we could still have this scenario;

The main reason i still like this scenario is because i think oil has started a new cycle short to fresh lows (E wave). (Daily chart from 24-03-16)



'Think' and 'acting upon' are two different things. Right now a short on oil with stop above last high, is a fantastic R:R play, but is there enough evidence to confidently take the trade?

A little confusingly, i saw another chart of oil elsewhere last night, which was completely different to my data feed. It was an FXCM chart which clearly showed
the low at the start of wave D as my pullback subwave 'B' low (in February) as opposed to the low on my data feeds being the leg down in January. (6Hr chart 15-03-16);



An updated 6hr chart as of Friday;



*Edit* hope the owner does not mind my posting it;



Now you can see what i mean, these two data feeds suggest alternate outcomes.

That would mean the complete opposite and we are likely in an impulse move long. If anyone else can post a daily chart of Light Crude, it would be much appreciated.

Personally i have to trust my charts and my thinking is that we have only had three waves short thus far. We can not end a cycle on 3 waves (except the smaller wave E of an ending diagonal - but that is still the 5th wave of the larger move).

The start of the last long cycle, (Wave 'D') clearly looks to me to be a 3-3 A&B move (with 5w'C' following), this means it can not be anything other than corrective. If so, it means the short cycle still has not finished.

Now look at the daily above and see that we reacted cleanly at the 61.8% retracement fib of overall wave 'C'.

If this is correct, then unless the markets completely disconnect from oil correlation, we can tie in both oil and Dow charts as short being the way to go over the next several weeks. It is back to the same argument now... pippage vs confidence. The latter parts of this cycle is where the confidence can really come into play.

We can take a risky but high reward trade now close to the previous high, or we can wait to see if we start making series of LL/LH's and the path proves itself, thus we gain confidence in our overall direction... or we can do both!

Plan the trade - Trade the shit out of the plan (once it proves itself!). Obviously a fresh high on oil (and/or the Dow) and we have to rethink.

Hello Cableguy

I read your post everyday and your posts are very helpful to me.

Here I post two CL future chart for you, Fig.1 is continue month, Fig.2 is may-2016.

your chart likes Fig.2(CLK6), FXCM chart likes Fig.1(CL continue month)

I have no idea about which one chart analysis is correct when conflict appears.

Fig.1 CL continue month chart

Fig.2 CLK6 chart


I hope the charts can help you tell something.

Thx for that svyelun.

Curiouser and curiouser! My charts are for daily funded bets, so they should match your continuance chart (first one), but clearly, they don't!

Unless i can find the same chart pattern on a May futures chart, i can not run fibs, but to my eye, in the (problematic) first chart, the downmove to the low, l;ooks very much like a 3w move, thus an 'irregular' corrective wave 'B'. That is even better, because that indicates that the following wave short will likely be extended - oil to end up mid teens anyone?!

Have to say, i would love this analysis to be right, because if so and oil is about to sell off again, i'm gonna short every pullback that i can determine and leave it to run, thus compounding a position short as it goes.

Let me see if i can find a chart to label to explain my wave count. A picture always says a thousand!

Thx again, cos at the very least, your charts are much clearer than the alternative FXCM chart i posted earlier.

Regards

CG

Ok, so my May futures chart is the same (4hr);



Now... i have labeled this chart as i spoke of above, with an irregular 'B' wave making the low in abc 3w, before the C wave uptrend in 5w.
I must stress that i can not make any fib levels line up for this count. Indeed the contrary. Take a look at this (daily);



This would indicate that the low was indeed the end of wave C (and normal wave counts also point to this).

It is simply too risky to take a trade on this basis, however, go back to the 4hr chart at the top and we are sat right on the 61.8% retracement level of the recent downmove that also created a LL. I can make a case for it being a 5w move, but it is weak at best. It's then possible that the move up from the low was ABC (as opposed to my 5w labeling), but it doesn't look particularly 'clean'. Unfortunately PA has not been kind to us in this instance.

Any further gain from the off when markets open and i would lose interest in this set of counts, but..... a nice 123 to the short side from where we are now and it might be worth the risk! It would make a nice rev C&H trade as indicated in the chart and we certainly have at present a 3w move (corrective) long, it's whether that becomes a 5w move with more PA printed!

It's a shame, i was hoping to confirm the irregular B theory, but i've probably disproved it instead. Equally, i can't really make a strong case for the upside either as i am quite sure of another overall leg down yet. Gonna need a bit more evidence yet me thinks.

I may have sussed it! I now have an alternate count for the long side, thus negating the previous several posts! This will only make sense to EW'ers.

You could argue that the posts are now pointless and it's all been a waste of time, but i like to show how, using TA, you need to be able to keep an open mind and easily switch from long to short at the drop of a hat.

I now have opposing counts which basically means no trade just yet. I have posted and labeled the charts for the downside, but i now think there was a clue in the previous chart where i showed wave 'c' was 100% of 'a'. It is common for waves a&c to share this correlation to each other when they are part of a 3w set but not so common within an abcde diagonal. That's not to say it isn't possible, just not as likely.

This could mean that they are merely a&c of a larger 3wave A, thus we could easily be in wave 'a' of overall 'B' right now - a 5w move (5-3-5 abc)

Here's a chart to better explain (Crude weekly);



It has to be said that on the weekly, wave A certainly looks like 5-3-5, with a&c being in one channel (as opposed to 3-3-3 thus far, with d&e to follow).

There may be a further clue on the Brent crude chart, (4hr);



It is common for wave 4 to retrace 38.2% of wave 3. If we show wave 4 to be an irregular correction, taking retracement fibs off of indicated wave 3 end, with 'b' making a fresh HH, wave 'c' (of 4) retraces and reacts exactly at this level. So 5w? or 3w?

This is what i meant before about needing EW analysis to be watertight. Right now i can make a strong case for both long and short on 4hr/6hr or daily charts.

This also explains my comment about confidence in a trade being overall better than going for max pippage. We are either going to finish a 5w cycle long, shortly with a fresh high, pullback abc for wave B and then we know we have another complete 5w cycle long to follow, that should be fairly easy to decipher if it occurs... or... we have the first scenario (short for wave E), starting with the need of the low (5th April) being broken...

Excellent posts. Thank you. It will be interesting to see how oil price is effected by this weekends meeting. DD

Cheers DD, i have other commitments for the near short term, so can not update as often as i would like, but will catch up on current charts as and when i can.

Sunday evening was interesting and just by chance that i noticed a different looking chart (the May futures chart), which led to the re-think.

I really like the look of the weekly chart (above) and if it does start to play out, we can really hammer oil in the latter stages of the pattern.

For now, i guess i will be trying to confirm the top of some cycles, thus we may have some downside to come soon(ish) in an abc 'B' wave. Brent Crude's 61.8% 5th wave extension is at 4606. Might be worth watching this level. Usually an irregular 4th means an extended 5th wave to follow, thus poss 100% of waves 0-3, (5150), that would lead to a much deeper wave 'b' pullback (of overall 'B'), than i have shown on the weekly.

Again, the best wave to trade (corrective) is always the 'C' wave as it is always in 5waves and usually can be deciphered after A&B. Let's hope PA is kind and we can read it's moves...

Further to expected ABC set for crude. I see the talks in Doha tomorrow stalling, with no Iran proving to be the stumbling block. It certainly looks as if we are already in our 'B' wave having completed a 5w move long for 'A'.

Unfortunately i couldn't get fibs to line up perfectly, so there is still an element of doubt in my mind, however, we might well end up with the downside that i mentioned earlier in the week;

(Crude 1hr);

A fairly quick look at the $ DX weekly chart and it has the look of a 4th wave (of a degree) about it. I've labeled it accordingly, but the current move short on the hourly is proving a little difficult to tie up. Obviously we should expect short term strength if my above scenario holds for oil, but the further 5w long for crude to follow would fit well with the dollar weakening further to retrace 38.2% of it's prior long cycle (i've labeled that 'iii' of 3, below), to complete 'iv' of 3. Just a thought, but would likely look to get short back into trend if we do see some upside early in the week. As always, this needs confirmation on lower timescales, as we do not trade counter-trend to the timescale we are watching!

Just as a side note, hopefully it was understood that as i changed my outlook for crude last weekend, it also influenced my thoughts for the markets. A further 5w cycle long for oil to follow, gives plenty more upside potential for the markets thus i revert to my earlier longer term charts for the Dow etc

In conjunction with my above short prediction in the short term for oil, it also appeared to me that the markets were rolling over from early on Friday. I chose to go short on the Dax before close and risk a gap-up upon good news from Doha, hopefully though, this should be a good trade;



Fresh LL, taking out last sig HL (5w prior set to the longside), pullback was 61.8% retracement.

The above Dax chart is Range candles, set to Ticks, but looking at the 1hr, i think this is a possibility;



The move short from 23rd March, looks like ABC, with 'C' clearly in a 5w move. The move long which follows is not so clear, however, we have not made a fresh high, thus if we continue to roll over from Friday's high, it is more than likely corrective and an overall 'C' wave which will take us to fresh lows in a 5w cycle.

If so, as usual, we can really hammer the latter parts of the move, once determined.

We have to trade the above as two seperate set-ups. Firstly, Fridays set-up (my fave H&S);



and result;



This is a trade in it's own right, but i did mention last night that the long cycle to Fridays high was 'not so clear'. I do not particularly like the count (post 155) and it is possible we are in a 5w cycle long instead, with my short cycle 'A' actually being the complete abc corrective cycle finished;



Difficult call right now and the thinking is that although the Dax & FTSE have closed their gaps, Crude hasn't (yet). If it decides to do so, it might fit that the Dax could rocket higher as per above chart.

Again, like i say, EW has to be watertight as there are arguments for both Long and Short from here, whereas the H&S pattern was a complete set-up, with risk determined and decent probability.

Did a screen grab yesterday of a second Dax hourly chart, showing Hidden Divergence formed for the bounce off of possible wave 4.

Here's the chart again from the morning first;



and updated later in the day showing HD;



Notice the fibs that i have added. These are standard extensions of waves 0-3 added to end of 4th for possible 5th wave end.

Currently, we now have a decent bout of Negative Divergence forming between indicated waves 3&5 end (if the count is correct!);



Now i want to stress that i do not like the current strength. It looks far more like a 3rd wave and thus this cycle is only really getting going!
Without confidence in a trade, it is pointless and the market will take your money each and every time.

I believe the above is a possible count, but i have other commitments right now and i really am not on the case at all.

I went long on a weak set-up yesterday (Dax) also late to the set-up, thus the R:R was skewed against me. My stop placement got taken out by one pip before it went up 100 points vertically. That one is always hard to take.

You might argue to give more room for stops, but that defeats the object of a set-up in the first place. My analysis for that very set-up was obviously wrong and despite my thinking we were going up, i still got it wrong. It seems mad to have lost money going long on the dax yesterday;



My trade was within the red circle. My thinking was that we had only had two peaks from a pullback low at that stage, the last LL shouldn't have been breached thus was the placement. My only explanation was an irregular B wave, thus wave C was ok to make a fresh low. Sly, but that's the way it goes. I had to go out just prior to stop out and i thought it would be safe. You check later to see your balance down, but the market up 100 points or so from entry, (without you onboard). I had to go out again thereafter, so prob best i stop trading until such times that i can concentrate fully again.

The far better trade, had i seen it, was my fave C&H with the Res line turned support and 123 off of the line. Perfect set-up, v.high probability and massively skewed R:R in our favour (blue circles). Such is life.

If my count in post 157 proves to be correct, you will ask, why not just go long and leave your stop below indicated wave 4?

Yes, probably should have, but that means a smaller position size overall as this still determines your risk. In all honesty, it is the start of the cycle that causes the problem. How to label it? (hourly chart i mean - not the range bar chart above). This is the biggest problem with EW, unless all cycles are easily legible, it creates enough doubt. Yes, it went up as predicted likely yesterday morning, but trading has so many aspects to it. I prefer trading high probability set-ups such as the C&H shown above or Fridays H&S reversal in post 156 (and countless others before that!)

The risk with stop below wave 4 (indicated) yesterday at the time of the trade i took was 120 pips, i chose a lesser stop and thus heavier position per pip.
My argument has long been for trading this way vs trying to hold all the way through a complete longer cycle. As i keep maintaining EW has to be watertight for this scenario, whereas a pullback within a trend that satifisfies the C&H/H&S/Flagline and 123 set-up back into trend in the absence of reg divergence, enables a far larger position and skewed R:R in our favour.

Discipline then becomes your only enemy.

*Edit* I see the Dax has already blown straight through the fib levels suggested in the hourly chart. I did say, i didn't like the current strength in any other capacity then to get long. Unfortunately the trade has been and gone for me until we get a pullback of sorts...

I'm readjusting counts so frequently on several of my previous charts, that it has become pointless to keep updating. This also obviously means that some analysis was wrong and being wrong leads to losses.


I will update more when i am back in front of the screens fulltime. Keep looking for those C&H's.



The only time this will be wrong count and fail, will be with an irregular B wave, however, judging by the scale of the prior abc (two legged pullback) and subsequent high for 'i', it looks far more likely a wave 'i' of a fresh cycle...

Realise trend, wait for pullback, get onboard, now with stop placement determined.