Since it is a counter-move, the likelihood for its starting point is in Bear Zone 1 or Bull Zone 1, after a Wave 5.
The shape develops as a result of a “Stong Off The Bottom/Top” move.
///Strong Off The Bottom RSI[i+1]>RSI[i+4]*3.5 && RSI[i+2]<RSI[i+5]*3.5 ///Strong Off The Top RSI[i+1]<RSI[i+4]*.28 && RSI2[i+2]>RSI[i+5]*.28 ///where RSI is an 8-sample HL2
The following image shows the ABC structure beneath the shape.
A, B and C waves each end up when they have printed a measuring leg (blue/red) and a divergent leg (yellow) that makes a (near) higher high / with still overbought/oversold RSI2 reading, but with a rather divergent value.
The last image shows the reaction that occurred from the spark zone, the subsequent trend line that was printed by the pullback and the break that was to happen in this current, trending state.
So, how is this market gonna reverse after all of this?
- Measuring leg + divergent leg closes down leg C
- You would see a full lambda move down
- a) that would provide an entry either upon the break of the low or b) upon a deep pullback (>65)
When the sequence does not play out like this, you may end up getting liquidity breaks followed by more pronounced divergences (higher highs) on new divergent legs.
Full Lambda Break