When you watch a lot of YouTube, you may start to think that all charts secretly have an Australian accent, and that the authentic name for a gravestone doji was always pin bar from the beginning of time.
What is the main point of giving names to RSI2 legs?
To know what kind of opposition would be able to reverse price.
See, there are ranks. There is hierarchy, there is supremacy.
Let’s see a basic case. From a zero turning point price shall commute until it gets tired and faces enough opposition.
The point I’m trying to make here is that the Zero ranks high in the hierarchy, from the single Zero print the price is going to be commuting in the opposite direction and it won’t turn back until at a minimum an M + D prints.
On the example above another M + D turned the direction back down, but once the M printed you could had put out your pending orders 1, 5 and 10 pips beyond the peak of the M knowing that this is going to continue lower. 1 pips beyond half size, 5 pips beyond the full size, 10 pips beyond going into excess. Notice that the D print may be scoring in the M field itself, but it is still called a D (divergent leg) for the proximity in time behind the M leg (in the next 6 hours or so).
On the image below the Zeros do not turn the direction back up, because the previous turning sequence did not rank higher. (M+D < 0)
There was an M+D continuation entry. Where D did only exceeded the M by 2.5 pips, so your sell order would only get filled for 1/2 size at the 1-pip beat.
The Zero sequence was interrupted again only with a brief M+D with the same 2.5 pips beat and half order fill, and the zero sequence kept on going until an M was printed. A Zero – M sequence draws a Zero-Mastodon axis.
At the Mastodon print the price direction officially is changed back up: 0+M> 0, and you know that a beat or a beat attempt may follow. In this case you got a 0+M+A reversal.
Two Zeros followed, that turned the direction back down. The 0+0 just as an M+D sequence was about the displacement, which was just shy of 5 pips -> 1/2 size sell order at 1-pip out.
The Double Zero was ranking just below the 0+M+A, so it did manage to reverse the direction back down, but Wave 2 down was short lived: a Zero Print followed (and even an M a little later), which, ranking just below the Double Zero changed the direction back up.
A score beyond the first magenta line is considered a soft reset that can temporarily yield to a counter move, which would normally mean a sequence of a measuring leg + a divergent leg. (M+D).
The next reversal down was a rather tricky one.
First of all, the expectation of seeing a Wave 3 and not a Wave C throws the perception off. If you think about it logically, a Zero is one step down from a Zero + M. There was also a double top kiss goodbye / beat Attempt setting up a lower high, and the structure was on its way down to print a Wave 1. From here on the plots and the perspective get distorted. Wave 1 did not end until the Mastodon print. Wave 2 ended on an “M”-reset. Which was in fact an M+D sequence but the dip between the M and the D leg actually went lower than the ending point of Wave 1.
So to be prepared for break outs, it is time to discuss what you should have a pending order out for: a Zero print exceeded in the direction of risk by 15 pips is a good place it at. The white line is the approximate location where price went beyond the Zero by 15 pips. When a break out is in progress the market is likely going to start channeling.
A lot going on here, the barely visible Turquoise channel line is a parallel of the Zero-Mastodon Axis projected from the swing high of Wave 2. After the break out, the Zero-Mastodon print temporarily turns the direction back up, and the opposition of a Zero-M gets rounded out to be a full Correction, or a Zero-M-C, where C lands on the parallel channel line and would get you in trouble if you had a pending order 15 pips beyond the zero that falls on the wrong side of the E-67 channel. Don’t do that. After the 0-M-C sequence, on the downside there is another 0 print, the Mastodon itself (extraction mark) is at first higher than the Zero, but it finally makes it back below the Zero in an M+D fashion, and the 0-M is one rank below the 0-M-C, so the reversal gets made.
I know, this is now starting to stretch too long, so down to current sequence conditions.
What can oppose a Zero-M? One rank down – I’d say, a Zero.
And what could oppose that Zero? An “M” in an M-D fashion. Either that, or a Zero that falls short of the E-67’s lower band and has a swing length at less than 32 pips would be continuation entry down.
War… Never been so much fun.