Aleš’s Lessons #4 – Wave 3

The 5 waves down wasn’t too hard to figure I hope.

On the 4 Hour you can see the trend line that they purchased again.

I know, this volatility crush did not make it to 1.0865, it was bought right below 1.0870.

Look, how crucial that 1.0875 has been!

Back to the Waves.

Nobody’s teaching this, it is my finding – thanks to using my own moving averages and plotting the highs and the lows out of habit.

Wave 1, 2 and 3 all cross through Mr. Maroon, Wave 4 and 5 usually does not make it beyond E32, they usually start from between E16 (Blue) and E32 (Yellow).

What makes a Wave 3 a Wave 3? It is the only wave capable to sustain a move beyond the sound barrier / brownies and usually would make a run to the daily potential, which is 1.0-1.3x the ATR of the last 3 days.

This is why the LEMA 30 RFC plots a giant #3 when the fluctuation maximum gets exceeded by a wave. As you can see, the starting point of Wave 5 down was also apt.

The 15-min ATR plots the orange field of where the end of Wave 3 is expected to land – in this case it was from 1.0973-1.0995

Rules of a Wave 3: do not defy a Wave 3.

Hints of riding the Wave 3:

You buy every 5-minute pullback to / beyond the local E-32 until (when it is above the E-135) the last absolute high exceeds the previous absolute high by more than 5 pips.

The criteria that I used for the auto hedger is that the highest high of the last 10 bars has to be larger than the highest high of the bars from 11 to 37.

As for the Stochastic Bars Stripy, I’m not sure if I’m going to make any changes, as for the strike out may seem on the early side, but the range (station) it called accurately.

They say a top is a process, a bottom is an event. There is some truth to that.

Here you can see Wave #1 failing at the Sound Barrier.

For Wave 5 now you are looking at 1.1050 with a slight chance of roll over in the low 1.103x-s

The Energy Bands would likely be from 1.1046 to 1.1091

The 50% comfort level is at 1.1065

Wave 4 down is due. They made it rally into the close as they always do to leave the cash market with maximum pain.

They improved on the last high by 3.9 pips (<5).

Wave 5 up was an extension fill (Projected Distance 240)

(so was Wave 3)