The Principles of Wave

Wave counting is as good of a pseudo science as any (Gulliver Wave)

“The Principles of Wave

Are difficult to understand

Do what you love and in the end you’ll find


I have got to give credit to my brother Elliott for counting to five and reciting the first three letters of the alphabet successfully – and I just ran out of credits.

Let’s examine the crazy volatility-event of Thursday, that was easy to misinterpret in the making I you were unprepared and were looking to closely.

This was a Wave 5 down that came out of a wave 5 of a Wave 4 and had a corrective ABC structure and was followed by an impulse wave 1 of Wave 1 up.

Right off the bat, there is a lot to digest here. How can a B end point take out the starting point of an A? It just can. (Think volatility talking into a megaphone).

Now, watch carefully, for as any good Kamikaze teacher, I’m only going to show this to you once.

It is a 15-minute chart you are looking at a Wave 3: it started when the RSI2 line kissed the 0 and set up the dive5gence on the left. Wave 1 of Wave 3 ended right before the vertical tie off of wave 2 touching 7 on the scale. Wave 3 of Wave 3 was weaker than wave 1, and it ended when the vertical drop (this time) matched the 7 read. Wave 5 of Wave 3 was a tiny flame; wave 5 had to measure in the vicinity of the RSI2 read of w3/We (“within 3”) and the current drop has to match/surpass the Wave 2 drop on the 30-minute chart. Wave 2 hit a zero. What will you get after the Wave 4 print? Wave 5 obviously (to be exact, wave 1 of Wave 5 of Wave 1 UP), that would have to make an RSI2 comparison of its own, a read of within 6 to whatever RSI2 peak was managed by Wave 3, wherever price would be at that time.

I hope you learned something new.

Strong off the bottom -> the Shape -> fully consolidated or not, it will be keep on going until it ends in parabolic tail before the correction

When Is Price

Do you ever consider the possibility that when is the price may be more important than where is the price?

By when, of course I mean the wave structure.

This morning’s wave 5 was a short one and it made a divergent double top with wave 3. I can’t draw from here, but I’ll walk you through it.

See the RSI2 peak in the middle reaching above 85? That was the measuring leg of wave 1up that was followed by a lower peak making the wave complete. Wave 3 kicked in upon taking out the pullback low of wave 1. Wave 3 made its measuring leg above 93 followed by the divergent higher high / equal RSI2 read. Wave 4 was the pullback to E16 (in blue), and wave 5 had a no strength push for a first leg and the second – that set up the double top, deepened the RSI2 divergence further.

What the market is doing now is setting up the first measuring leg of wave 1 (whoop) down.

The following applies in Fading Market

Bam can be faded: on the way back it would take out the back swing of Whoop.

You are looking at BAM to the upside – the expectation is that the pullback of BAM would undercut the pullback of Whoop by either price or by RSI2 reading.
This time it was price. My RSI2 cropper routine cut the 2 positions at market – that is how they ended up a little higher with the spread and the slippage.
The lastflow isn’t equal to 500 if it found an RSI2 divergence in the last 500 samples.

Close it out beyond whoop upon an RSI2 divergence or upon the RSI2 swing surpassing the previous reference.

The WBB count starts from an outer stretch beyond E16.

Fade the struggle

Boogie has to make a measuring leg first and then beat it with a divergence, thus you should load up for the counter move on Boogie when it is applying pressure on its thrust peak failing to get something stick beyond.

Good going on this tiny account with 40%+ gains both days this week since the funding.

My best daily gain in September was 92.5% on a different account.

I did want to mention about how ominous the looks of the triple resistance above is on EUR (the Moat in Red, the median in white and the sample high in red – never seen this looks before, EUR may get creamed in the near future.

Price may be at a stretch here for a fading market (brownie points) but we at Whoop Bam Boogie Trading cannot advocate fading an opening move while the measuring leg is still printing. If short, consider a partial cover.

Thesis: Silver Surfer

So, there are two types of markets.

E-16 I have had a long lasting fascination with. I used to call it the “Water Line” and plot it in blue accordingly. Waters can have current, but this white blog paper is about the electric current that E-16 gets to be charged with in order to act as a magnet that repels or attracts.

The two types of markets this causes are the Smooth Sailing (Surfing) market and the Fading market.

Try to picture for a second, that the price has a positive charge, and our Electromagnet, E-16 has a negative charge.

The magnet itself has a direction, but what is important is the “wrapping” around it: price gets pulled away and it naturally falls back… until hitting a breaking point – the point of no return, where the attraction is too low for the price to be naturally drawn back from.

The when the point of know return gets tripped, the electromagnetic current changes direction causing the E16 to start acting as a repellant.

The characteristic of the positive (price) – positive (E16) market is that supports and resistances get surpassed with ease, and ultimately count for naught. I mentioned in the previous article, that what you have to work with instead is the degree of stretch and time.

You can witness on the following image how all resistance levels accounted for nothing until the mean reversion was complete, and then the momentum (polarity) carried price further.

The only actual stalls were upon tiredness, upon reaching the daily fuel limit (I am pretty sure I shared the formula for calculating this a number of times) for regrouping.

The next thing to talk about here is the point of going too far. This time not in relation to the rubber band, but in relation to pushing the positively charged particle (the price) to the other side of the positively charged E16. Of course, the rubber band stretch helped. Remember, that the flip happened in Bear Zone 1: between 1x and 3x from the mean.

What happened on the upside is that we ran out of current. The interrupted line is what I call the “computer buy”, and even that changed its mind before price got to it.

The market transitioned back from surfing/sailing mode to fading mode.

The characteristic of the positive (price) – negative (E16) market is that the price keeps on falling back to the the attractor current.

Due to the wrapping around the E-16, you cannot expect any move to exceed a full fluctuation size (until a point of known return shows up), and if you want to make money, aim for 1/2 fluctuation size bites (i.e. from the green and the orange stripes).

Boogie mans have the potential to turn into something more, yes.

I use the arranged LEMA fan (30min, 1H and 2H) plus the 30MA (hourly) to detect for “charged market”, and based on this, it would not take much to re-instate the positive current, the orange line would have to go back below the Green River, is all.

I wanted to insert here a video from the Powerpuff Girls Series (the old one) where Mojo Jojo rambles about

“Magnetically inducing magnetism, thus creating a Total Meltdown” – but I could not find any trace of it, so you would have to entertain yourself with some of the cartoon scenes I worked on instead.

My compositor portfolio

…would be testing for the rest of the weekend…

Trading Bear Zone 1

For the trading in bear zone 1 different set of rules apply.
The zone itself is between 1x and 3x fluctuation maximum distance away from the Mean, the Green River.

Image shows the Guard Rail in chartreuse being 1x stretch away from the mean and Purple Haze being at 3x stretch. The move started from the spark zone (Kiss Good Bye to the Red shading). The transition was the consolidation at the Guard Rail.

Supports and resistances have secondary to no importance, what you must resort to is the degree of the stretch and time.
A range bound market – if a definition can be given at all, fluctuates between bear-zone-1 and bull-zone-1, since the bears are at disadvantage in bear zone 1 and of course the opposite applies at the other end.
If someone makes a statement like “the bears are in control here” they do not know what they are talking about.
In bear zone 1, the strong handed bears not only have to counter balance and exceed buying, but they also have to be put up with weak handed bears covering in droves (meaning they are also buying).
The only weapon strong handed bears have is orchestrated effort, which entails waiting the right conditions to develop for a power move.

To act, which is dipping their paws into the short-honey jar, they must wait patiently. They must sit on their furry butt until Whoop, Bam and Boogie finished with making sandwiches in the kitchen.

Whoop Bam Boogie as in SOS, SOS, Boogie Man

Only then they can make an effort in stretching the rubber band further.

Whoop Bam Boogie as is SOS SOW SOW

Pin Pointing The Boogie Man

Is 30 minutes late too late to get in on a short? Usually not.

If we know, that the Boogie Man lives above the 16th floor and it is the best signal for going short in an embedded oversold market, then how would you look for one?

if ((Period()==30 && High[i+1]>iMA(symbol,0,32,0,MODE_EMA,PRICE_CLOSE,i+1) && RSI2[i+1]>82 && RSI2[i]<82) && (( RSI2[i+3]<RSI2[i+2] && ArrayMaximum(RSI2,14,i+2)<RSI2[i+1]) ||
      ( i>0 && RSI2[i-1]<82  
      && RSI2[i+1]>RSI2[i+2] && RSI2[i+1]>RSI2[i+3] && RSI2[i+1]>RSI2[i+4] && RSI2[i+1]>RSI2[i+5] && RSI2[i+1]>RSI2[i+6] && RSI2[i+1]>RSI2[i+7] && RSI2[i+1]>RSI2[i+8] && RSI2[i+1]>RSI2[i+9] && RSI2[i+1]>RSI2[i+10] && RSI2[i+1]>RSI2[i+11] && RSI2[i+1]>RSI2[i+12] && RSI2[i+1]>RSI2[i+13])))

…and how many would this find in the last 340 samples?

The P/ on this image refers to the Purple Haze below – it factors in progression/angle – pretty darn accurate can be.

Look at the bright side: there will be no false signals.

Now, you just have to think of the exit condition.

How about these?

Cover after SOS print + undercut of the recent low / divergent RSI2 print below 15

Cover on low RSI read below Purple Haze

…and think about this: I get the same picture from 2 different brokers that are 2 hours apart in their server time, and only one is an ECN broker. Beat that!

Ask not what the Boogie Man can do for you, but what you can do for the Boogie Man!

Day Trading Checklist Sample

  1. Market type – embedded oversold (3 daily closes or more in long term oversold – comfort levels 4H) – this tells you, that the direction is down, play counter trend only during exceptions, in a short window
  2. LEMA configuration – Bearish: 30 min LEMA below 1h LEMA below 2h LEMA – plenty of resistance overhead
  3. Daily fuel limits 1.0991-1.0975 remark: daily fuel limit was reached yesterday, so today may only be a no break extension – upside limits: 1.1096-1.1112
  4. Last root (RSI2 divergence / beyond 30MA / Boogie man): ~1.1086 – remark: new root may be in the making with the current no break extension thrust
  5. Is there a valid SOS (Sign Of Strength) / SOW (Sign Of Weakness) in place – meaning from the last RSI2 divergence; an SOS is only valid if it arrives on the first move (whoop), it has to stay on the same side of the 30MA, the disqualified ones, on Bam and on Boogie take on opposite meaning; if there is a valid SOS, look to cover your short below 15 on RSI2 and go long to the other side of the 30MA or to an RSI2 divergence
  6. Daily energy bands range (from the middle to the MOAT): 1.1155-1.0956
  7. Last line of defense: last support is at 1.1042, 1.1037
  8. Point out the confirmation tail if there is one (a 2-4 candle sequence)
  9. Where would you be wrong about your directional call?

Verdict: counter trend move may be almost here, cover shorts near 1.1037, go long for 2 legs up. Aim for the other side of MR. Maroon at 1.1077

Your confirmation: the red tail

As promised, the SOS / SOW code snippet

 if (Period()==30 && i>0 && RSI2[i-1]<82 && RSI2[i]<82 && RSI2[i+1]>82 && RSI2[i+4]<82 && High[i+2]<iMA(symbol,0,60,0,MODE_SMA,PRICE_CLOSE,i+2) && High[i+1]<iMA(symbol,0,60,0,MODE_SMA,PRICE_CLOSE,i+1) && High[i]<iMA(symbol,0,60,0,MODE_SMA,PRICE_CLOSE,i))      
  {  ObjectCreate("SignofStr"+IntegerToString(i), OBJ_TEXT, 2, Time[i+1], 70);  
      if ((RSI2[i+5]<15 ||  RSI2[i+4]<15 || RSI2[i+3]<15 || RSI2[i+2]<15 || RSI2[i+1]<15) && !(iHigh(symbol,0,iHighest(symbol,0,MODE_HIGH,4,i+5))>iHigh(symbol,0,iHighest(symbol,0,MODE_HIGH,4,i)) ) )   ObjectSetText("SignofStr"+IntegerToString(i), "SOS", 58, "Arial Black",  clrChartreuse);
       else  ObjectSetText("SignofStr"+IntegerToString(i), "SOW", 58, "Arial Black",  clrMagenta);

So, where were you wrong about the upside? 5 pips below the last line of defense = 1.1032 – this should had been your plan B.

Where did price go to? Daily fuel limit highlighted above.

What was wrong with the trifecta of the three pushes?

The second one did not make a higher high (it had an RSI2 divergence of its own), and whilst the RSI2 peaks went ever higher, the 3rd run up ended up falling short of the 1st.

This was a bear flag, with a Boogie Man: the sign of strength came on the 3rd push and at the border of the neutral zone and bear zone 1, where bears reload. Incidentally the E16 was in the same location, which is a starting point for a wave 5.

Purple Haze just got hit

The daily fuel limits got modified a bit as the day progressed and another consolidation weight appeared slightly lower.

The Boogie Man

The Boogie man is a sign of strength at the wrong place and the wrong time.

The wrong place is: in the overbought measured by 30 sample stochastic D over low/high with 3 slowing (green oscillator), and the wrong time is at the end of a cycle.

The upside attempts can be grouped as a trifecta, with the individual attempts as Whoop, Bam and Boogie.

The sign of strength means a spike on the RSI2 HL2 to above 80.

You should be interested in the upside if the SOS comes on the first strike, and should be turned off is it arrives (barely eeks out the score) late in the game.

To add some extra content to this so far small blog entry, I should mention that with the reprise of Focal Candle I finally have returned to plotting hourly charts which brought along its 30SMA, so now I officially have 2 moving averages along with the standard E16.

The 30MA acts as a mediator, serves as a mean, and there are negotiations around it continue with the direction of the approach or reverse.

I don’t think I have discussed the 4H wave 2 finder routine so far, so here it is:

The idea is that the 4H Mr. Maroon (135E High & 135E Low) has been crossed for the first time in twenty-some samples and now we need to look up the second 4H doji in the past and have it faked out for a wave 2 / wave B.

Here it is:

…SOS attempt in the making

…now this was a tricky one. They utilized the bull vulnerability to the maximum possible extent. An SOS is a scratch if it spikes above the 30MA.

No sign of strength still since the last upper divergence. It is working on it now.

This was the ballpark target for the day based on the daily fuel:

1.1042 seems to fall between those two numbers.

…one more thing, remember the steep rally a few days back?

After the SOS print, the RSI2<15 is your long entry.