Aleš’s Lessons 9 – New Wave

A wave structure should be visible on the 4H chart.

A new wave structure starts from the other side of Mr. Maroon – which usually coincides with E96.

Wave 3 starts when Wave 2 ends. Wave 2 makes a visible bend on the 9-sample stochastic, and likely takes it to an oversold level. As you can see, there is a counter move in there somewhere before the last push down (Wave C) which ends with an RSI2 reversal divergence.

You can see the corrective nature of Wave 2 down – an ABC move down.

Wave 3 ends with an extension fill and does it so with an 8 or larger DeMac count. In this current example during the earlier batch all outstanding extensions got their fill by count 12.

The following 8 -batch had no ambitions going after the last extension, and so the high of the 8th got never exceeded. (Choppiness DV shows this high as an exhaustion & a beat.)

As you can see, price is now in a Wave 4 down (tattackhe 2nd attack on the oversold since the New Wave root), yet again with this schizophrenic motion of going in two directions seemingly at once.

Wave 4 would make a shot over the bow: it would likely go more oversold than Wave 2 got to – since Wave to failed at E32 (yellow), Wave 4 is expected to get further, to E-67: a near miss of Mr. Maroon is very likely in the low one-sixteens, before Wave 5 up would kick in.

I managed to suppress the urge to post some Duran-Duran here. Props for me!

This move, that showed no follow through upon crossing over the consolidation mean at 1.1735 is expected to fail before reaching overbought, possibly around the f. 1.1791 level.

The extension is a stone throw away at 1.1827… I know, this is exciting.

The moral of the story is the divergence in price progression and distance from the mean:

The take away is that the wave 4 we saw was the wave 4 of Wave 3, not yet “the” Wave 4.

Not being able to reach the extrnsion levrl at 1.1827 is a valuable piece of information about the weakness.

Now there are 3 continuation divergences that can be knocked down like dominos which would provide clearance for the price to get back to the mean.

Wave 5 may go as far as reaching a similar degree stretch from the mean as wave 3 of Wave 3 achieved.