We wrote a couple weeks back on Gold breaking out to the upside. After giving the market a few days to develop its waves, it appears a bullish 5-3 sequence has unfolded to the upside. This presents a higher probability scenario that we may see at least one more 5 wave sequence higher.
That means we probably have room to $1190 if not higher based on the longer term count from 2 months ago.
Wave Count - Suggests at least 1 more 5 wave sequence higher
Wave Measurements - A move above $1200 builds the case we are in wave iii. Traders can add to their position at that point.
Sentiment - SSI is showing +1.35 which is fairly tame. We saw in late August the SSI reading turn negative and I would anticipate a similar outcome if this move develops.
Bottom line, we're anticipating a wave iii move towards $1245 while $1090 holds.
Also, based on our other bearish views on EURUSD and GBPUSD, buying Gold while selling EUR or selling GBP (essentially long Gold/EUR or long Gold/GBP) may be a paired trade to consider as well.
Why add more after $1200. I guess one can add more to the position once it breaks the top of wave I (1169 roughly). That should confirm that we are in Wave 3 shouldn't it? Thanks. I am long Gold and in profit currently.
JWagnerFXTrader
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Great question. In essence, alternating waves typically run in distances of equality or of fibonacci relationship. So in this instance, if price pushes above $1200 (which is slightly greater than the equality measure), then prices are likely to run further towards the 1.618 relationship towards $1245.
The key is catching the move early in wave 3, then you can add to with smaller positions on a break above equality. At that point, the stop loss gets moved to above the wave 1 high.
It sounds like a lot of moving parts, but we are using tendencies to our advantage. Due to the many moving parts, if it still doesn't make sense, keep asking.
To your other question, a break above 1169 is a symptom of wave 3, but price could move to about 1190 and the whole move would be corrective and not an impulsive wave 3. So its not out of the woods until a sustained move above 1200.
Nice work on floating a profit thus far!
IvanLabrie
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Adding to winners is a very reasonable approach, also good to cut losers partially before hitting the stop, to then forget and let lady luck take care of them if they look suspect (Something I do often).
We might see some continuation from this point I think.
JWagnerFXTrader
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You are on it Ivan! Yes, the plan above is a strategic way to add to those winners. The RR ratio on the second batch is obviously not going to be as good as the first, but the odds shift once price comfortably surpasses the equality measure.
On a similar note, as you know, we've been on the trail of EURUSD and GBPUSD possibly being in a wave 3 as well.
Their equivalent equality measures are 1.0830 on EURUSD and GBPUSD near 1.5000. That is why I've noted those price levels in those posts. GBPUSD is the REALLY interesting one because of the red circle wave 'i' in July...it implies a much deeper sell off.
EURUSD
GBPUSD
IvanLabrie
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EURUSD: I don't see a single clear impulse, more like a big corrective structure.
In fact, I think it will turn up, probably completing this corrective move by the end of the year.
As for GBPUSD; I had a short idea, it's possible it was a wave 1-2, the selloff we had is nice and very sharp but I'm not sure of the structure, can be many things and still not be a trending impulse.
One thing, I don't trade using EW, nor use traditional EWI school, but Neowave (Glenn Neely's take), so my labeling is different.
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KristjanRoivas
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If I´m not wrong, 5th line being longer than 3rd line negates it being correct Elliot impulse wave./BLUE/
So should´ve there been correction waves instead?/GREEN/
Or that rule is not that important?
I really appreciate any discussion on it. I am new to trading and really want to learn.
JWagnerFXTrader
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Excellent question Krisjan! I think the Elliott rule you are referring to is that wave 3 cannot be the shortest of waves 1, 3, 5. Yes, wave 5 is longer than 3, which is acceptable because wave 3 is longer than wave 1. In this case, wave 1 is the shortest of 1, 3, and 5 so it abides by Elliott's rule.
Below, I have shared an image of a 5 wave move that is not an impulse because wave 3 is the shortest. That was the GBPUSD back in March 2015. During the US Opening Bell webinars, we discussed how that move suggested new highs were coming because it was corrective and NOT impulsive.
KristjanRoivas
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Thank you very much for that explanation. It was really simple to understand and GBPUSD example made things really clear. You rock!