Let’s discuss one mistake I made today and the ways I invented in order to prevent committing the same mistake again.
So I made this image the other day about the wave structure. That W4 did not seem right for it went down and back on the same candle. It was a liquidity break.
A liquidity break happens when the market is trying to find footing, trying to find orders. During a news event the participation dies off, so a “larger” stack would turn the price away.
The Burns outlined the Cover Long level – with a displacement of 16 pips on the upside, and the Cover Shorts levels by a displacement of 20 pips on the downside – so this part was already in order.
As you can see, the Green Burns were the starting points of Wave 1 and Wave 3. The beginning and the ending of a move are not that different – this will come back later.
Now, let’s talk about the real Wave 4.
The most obvious thing on the image above is that the wave 4 found footing at the Green River. I have been saying out loud, that the Green River has the power to reverse a move, any move. What’s more is that usually the first leg would land on the closer end and the second would go to the further end.
Dynamics: a subtle thing, but you could read this above as well: the SDU projection box on the upside was thrusted into, the SDD projection box on the downside was left untouched, and the SDU to the upside was blown right trhough (a sign of a starting move).
Of course there are the Green ellipse highlights of the lows by the Wishing on a Star, which mean buys as well as the green rectangle, which represents losing the oversold status (- which is now factored in the candle shading).
The blue arrows represent a right shoulder (for this was a Head and Shoulders reversal). There was a cross up warning earlier.
The 2 new added features are the on screen RSI divergences (in yellow) and the black, computer identified Terminal looking moves (based on 3-4 candle price behavior).
Let’s talk briefly about what happened afterwards.
There was a Failed Buy (no liquidity/too fast run up) that represents a warning: Sell the next cross below RSI2 – 93. This means the first settled 30 minute value below 93 – after being above. If you look in line with the DDI-T print, you shall find it. (I just noticed that the price actually spiked into the DDI-Ts projection box).
The last wave (I would argue that the whole Wave 5 was an ABC up) got kicked off with a Green Burn again. Price failed in the Bull Zone 1 where the Short Time Frame Bulls covered. There was a count sell, the red line got exceeded and there were 3 overlapping terminal lines – as well as a starting, – terminal looking – move to to kick off the move to the downside.
The Successful Sell would urge you to take a sell again on the cross below 93.
The green highlight box is 1 fluctuation size away from the swing above – white line connects it. There is an inversion of the overbought and the oversold lines – this may mean the market embedding – which of course would mean counter trend to the upside, since this is still an embedded oversold market.
If I had to pick a buy zone, it would be the spark zone with the green sticks.
My personal mistake was the wrong wave count and complacency: 235% gains in 2 weeks does not exactly make you being on your tip toes wanting to hedge – the 82% balance to equity ratio and the late night combo made me turn off the Auto Trading (and the auto hedging with it), for at 80% half hedge would kick in and at 70% another half, and overnight a mere wrist move at the broker would push the ratio below 80 even if the price did not proceed further. There was no disaster coming out of this, but I missed out on plenty of monies as a result (i.e. my usual daily 20% and only made 5%).
Another, in your face screen plot from yesterday is yet another way of plotting the daily fuel limits. Now they are two triangles projected from the weight and the fuel overbought/oversold areas are the two flat ending lines of the triangles. The coloring has a path of least resistance logic which is based on the number of near term 4h dojis above versus below.
The 4-h overbought embedding may sustain as long as you do not get 2 opens below the overbought line which is going to be adjusted to the new swing high soon (during the Sunday open). The way not to lose the embedding to the upside at all is by taking out the high in the first 4 hours.
If it loses the embedding, then these 5 waves to the upside were all she wrote.
The real wave 4 – shown in a Picasso art: