The soft rains of April are over. Hard work starts now. Dissecting the trades of the week to gain practice on what to look for, how to think.
As a lead up to this article, I suggest you read the post I made prior to this, the Moving Averages – Water & Mud line.
Sunday Night started with an exhaustion gap up, and came an immediate pullback afterwards. The gap up was your clue to a wave 3, and you had a shorting opportunity back to the 1h LEMA. The 1h LEMA was a buy on the 2nd touch, when the stochastics were out of oversold, and with the first move up you printed the first wave up of Wave 5. This upon penetration would provide the launching pad for the continued move up.
All this was playable based on the 1h readings.
Reminder of the gap’s quaility:
After this, the right time frame was the 30 minute, you were looking for the end of W5, which was possible to do by watching the MACD.
Following that, there was First Blood, that came down to the 7.5 minute LEMA. Since normally I do not have this displayed, here’s the
_LEMA_Quad (infested with maggots)
that would plot this on the 30 minute time frame. I’m trying to spare you having to go down to 15 min you see.
The 30 minute momentum was on hold your shorts all along the spike happening back up to knock out some stops above the high. Remember that this is a possibility.
I no longer call Lemas defletors, I refer to them as wind tunnels. Here are the 4h lines:
From the latest peak, the correction would have to bring the hourly Stoch to oversold at least twice, for even an ABC would do that but 5 waves definitely.
As for practice, answer the following questions for me on the chart below:
1. Why was this a sell
2. Why was this a sell
3. Is this a buy?
The 3rd is a little bit of a trick question, it is locally oversold (black RSI2 on the oscillator) but if you go down to the 30 min, you have oversold stochastics, you are at the 1h LEMA with the fan blowing from below. It is a premature buy at least – in case a lower low would show up to set a divergence. The middle of the spinning top, the 1h LEMA and the pro volume should provide you with enough support (throw in 1.23 and the 70% hourly comfort line for good measure). Yes, you would need to flip the hourly river, but it can be done: the mud line was already violated.
One more thing, the FXE has proper volume, that can help with determining the seriousness of a peak or a bottom.
sign of weakness reprise…