Last week I said I hoped to get a daily reversal pattern to feel confident in getting short on the expectation of Minor wave 2 topping. I wasn't fortunate enough to get pattern. But the follow-through weakness to the downside today suggests Minor wave 2 has already topped. It will be confirmed, in my view, on a break below the first (b) wave low. But I will try to get short every chance I get regardless. My stop is just above 1380.39 since that is the level that needs to be held for the above labeled wave count to remain intact.
Bottom line: I'm shoring rallies, and any good opportunity that arises, with a stop just above 1380.39.
(VIDEO) EUR/USD: A Great Real-Life Lesson in Elliott Wave Analysis
As many of you know, I'm not confident in the longer term wave count for the EUR/USD so I've been using basic technical analysis to identify the larger trend, and also using short term wave counts, and have just jumped on board for the ride. Although my analysis on the euro has been quite simple, it has been extremely effective for over a year now.
Although I don't know the larger wave count, I can see that it looked like the weak, choppy sideways rally from the 1.2160 area to the 1.2320 area is indicative of a 4th wave. Judging by the size and length, I'm estimating it's at Minor degree. The resultant decline into this morning's low is clearly impulsive as you can see I labeled it a 5 wave Minute degree decline.
If the above count is correct, then the bears need to beware here. We have a 5 wave decline into a 5th wave of Minor degree preceded by a gap open that has not yet been filled. So a large snap back rally could occur at any time. This is no guarantee of course, so I don't want to get long. But I have covered 75% of my short positions to reduce risk. I've made a lot of profits on this euro run and I'm not giving them back simply because I didn't exit when the risk/reward flipped against me. Sure, the euro can continue cascading lower and I'll miss more profits. But this is a risk/reward game, not a roulette gambling wheel. The risk/reward in my view is not worth staying heavily short here. I have a tiny short position still in place and will exit all of it once I see a strong sign of a reversal. It's also possible I'll get short again in the near future if the outlook changes. But right here, at this juncture, the evidence is strong that the euro's downtrend may be in jeopardy for the moment.
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PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.
