you can see that the Wave 2 pullback came back to the upper half’s oversold level at 60%
you had to be looking for a sell, for the 0% or overdrive down level got more or less touched, and this strength measurement means that the market is strong to the downside
a turn would happen when it would start to miss the mark, like it did at the top: it went into the E-32 (in hourly denomination) upper overbought, but it did not get beyond 96%, and started making lower highs, broke into the upper oversold zone and presented a perfect sell
the recent 2 touches on the 0% mark and the next miss (looking like a head and shoulders on the 30-min) said that the market went too far, but it is still very strong to the down side (in fact, if anything, it has picked up some extra momentum)
the mean reversion took back price again into the 60-70% range before the next waterfall down
Wave 5 down is now sitting at a point where the structure theoretically could be turned into an upward move by purchasing the 40-30% range of the channel: the up move would become a qualified Wave 1 up by crossing over to the other side of Mr. Maroon and Wave 2 down would be printed with the hourly red stochastic going below 20
I personally think that the market is going to make this a 5th leg down and going to miss the 0% by some single digits and perhaps make a head by applying a beat sometime later
there is enough daily fuel to get below 1.17
the system is calling this structure an A-B-C move, and the Crack Ho is inches away from cracking back below 45 which would rule the crack above 55 section a fake out
so, that’s the other 2 balls to keep an eye on
(the liquidity break purple strike out re-enforced the move to the upside)
those projected distance numbers ARE attainable
who in their right mind would want to be long this?
I have tempered with the subject before, i.e. in my e-book that was released in March, 2019, but never before on a 1H chart.
I had made great progress indentifying certain features, see a blog entry somewhere under the title of Driven Thrusts & Lackluster Busts, I managed to distinguish between a screw driver and a drive/ double drive, thus things are starting to fall in place rapidly: the previous passes on 30 min RSI2s are of great help with starting out not from scratch on this time frame.
First some snapshots of Thrusts and Failures (busts).
Now my attempt for laying down the foundations.
What is a Thrust? It is a 14-sample new low/high with no beat on the next hour and was preceded by a drive within the last 16 hours (and there was no thrust 3 or 4 hours ago.)
The Drive is at least 3 hours worth of potent selling/buying.
Failures may be different kinds, i.e. there was a Thrust not long ago, there was no drive within the allotted sample size.
So let’s see a real life example of monitoring for a failure. On the image at the start of this article the F did not have potent selling/drive within the last 14 bars. When the F got printed and price got back above the last T terminal, that was your buy signal to go long for a driven thrust on the upside.
The chain of T-s followed by the “no more selling” signal marked the end of a Wave 1, since this was an impulsive looking structure.
Wave 2 clues – if you have been following my works – include a move back through at least the closer end of Mr. Maroon and 9-sample Stochastic D going back into overbought.
I did what every EUR/USD resident should do upon a realization and tolled the bells.
This is where we currently are at. The pink/magenta circles are the Maroon fake-outs (they come standard with the LEMA30N).
The white circles are highlighting the idea that the overdrive line may actually exist.
The yellow circle highlights the reaction from the 89-eyed Iguana (a squaring move), the next encounter was a let go, so the third one should be a spike.
I decided on ND standing for No Drive and the FCB standing for Failed To Close Below.
The drive signal I have yet to figure.
Wave 3 is showing the first thrust. We have gotten quite close to the daily fuel limit with the low at 1.1753.
The one other thing I wanted to mention is that the top was made with a double driven thrust (so picture a double sized T at the end):
There was an extension fill along the way, but a new projected distance target was also generated by this Wave 3 down.
Go figure, 1.17 coincides with the overbought neckline. I think that’s a target.
And the oversold level of 1.1748 is going to let price go on the second knock, believe you me.
remember, that a Drive is a thrust at the same time, but the Thrust has a time constraint, thus it can show a winding down
As a farewell, a riddle to think about: how can the oversold level be above the overbought?
E96 let go - buy Green River - buy Mr. Maroon - 2x stretch reaction (sell)
- buy Mr. Maroon - 3x stretch reaction (3x)
buy fresh out of overbought 4x -> target 100%
- 1st miss: buy fresh oversold - target 100%
- 2nd miss: buy fresh out of overbought - target 100%
100% beaten 3 times ->
easing back to just out of overbought -> buy 3x
100% beaten 2 times, missed 1 time -> it is over with
sell miss of 100% -> target 0%
-> 3 fresh oversold touches with 2 reactions back to overbought
-> a final miss of the 0 - it's over with
buy miss of 0% -> reaction from fresh out of oversold
-> buy Green River
-> add fresh oversold 2x
-> 100% hit 2x, 1x miss
sell miss of 100%
-> add on fresh out of oversold
-> 0% miss gets beaten by 44 pips
buy the beat of 0% miss
-> add on Green River -> target 100%
-> 100% miss: it's over with
sell miss of 100%
-> 0% hit
-> reaction from 28 pips beat of 0% hit
-> sell fresh out of oversold
-> 0% beat 2x
We left with the previous article pointing out the presence of a triangle.
I certainly had my mind set on a bear flag and a lower low first to complete the Wave 4 before the final move up.
The weekend open and shallow dip was particularly tricky, for with the increased spread (10 pips or so) you could never take advantage of it, the lowest fill would had been 1.1838 despite the bid chart showing 1.18292.
What are you looking for on the upside when a terminal wave is printing?
Although the Energy Bands were not able to keep up with wave Wave 3, they managed to catch the top of Wave 4 and Wave 5 came rather close to it, so they could have helped a bit.
What else? Symmetry perhaps:
The most recent stretches went to about 4x stretch from the mean. Price came close to this as well – with volatility dropping away a bit.
Yet another near miss was the overdrive-line.
Could we still get a beat after this 4-H exhaustion? Perhaps… price is still in the overbought. But I’m not expecting it, for the whole structure to the upside was of the corrective kind, an A-B-C – see the abundance of the overlaps.
The two extension (projected distance) lines were the best clues, as they got their fill and 7-pip of extra beyond. Price seems to be interested in the trend line once again for a back test.
The overbought neckline is now in line with the last swing low @ 1.1710. I expect that low to be tested next.
(…for the overbought side as it stands currently…)
It’s gonna be a long one, so grab a cup of tea!
Step 1. Identify the embedded overbought condition
I handed out the free tool for this one (instrument independent) in Aleš’s Lessons #10 under the name of Comfort Levels 4H Lucid and marked up the back test of the overbought neckline on the image above. The Blue, 80% line has not been seen back since – this is the realm of the overbought safety where higher highs are more or less guaranteed.
The first tail spin happened after a 585 pips relentless run up measured from the back test of the neck line and was 213 or so pips long (green).
The run up had a total of four, 4H exhaustion beats or 3 break outs. Not gonna confuse you with break beats, don’t worry.
Any energy sequence could come to a halt after a beat: no interest in continuation would result in not breaking the beat. Let’s see if we can define a maximum duration for a break to must happen.
The first exhaustion – shown by the Choppiness_DV plots had 3 consecutive beats and the break of the beat happened 20×4 hours after the exhaustion and in a rather volatile manner.
Conclusions here: the break out is not very clean with multiple kick backs reaching up to 66 pips. The optimum way of playing is to have a holding and scale out on a beat. Reload below two 4-Hour lower lows – see brown box. Your optimal get out has to do with the count: you want to be active from count 8.
The second exhaustion had its beat 6 bars later and the break out was 12x 4 Hours down the road – with not much kick back this time. Interestingly the 8-count fell on the 3rd exhaustion print, which was also a beat. That’s two scores for the 8-count.
There were no 2x 4H lower low entries here, but the break itself was a safe adding point say 6-9 pips out.
From the 3rd exhaustion the count does not seem to get the exit right with the number 8, but it does get something else right: the number 7 count provides you with the stop loss values for the parabolic ending (lowest low of 6/7 gives the actual number). So, 1.1828 would had been your trail stop stop out if you did not want to scale out upon seeing the green circle event – the engulfing candle that was brought on by the 4th exhaustion.
The #1 counts were great entries, but you would not have these printed real time for you need 2 more candles before a candle can be called a fractal. For quick trades, you have the 7-count real time, and you can sell off on the 8-12 counts.
The last exhaustion was also a beat, but I could not write one software for every possible occurrences: a higher high and a close back below is always a spark, and can always balloon into a rapid fire.
Before closing out the exhaustion/beat section, let’s acknowledge the fact that the tail spin ended in an exhaustion-beat which was not followed up by a break as well as the new run for the top resulted in another exhaustion beat.
Since the whole thing looks like a ranging / consolidation are it is safe to think that if this was to continue, the most likely thing to print here is a bull flag, which would give a lower sightly low as the next low risk entry somewhere between 1.1694 and 1.1651 (overbought neckline currently).
Of course, the 2nd tail spin can also turn into something more.
3. Projected distance
Since the neck line back test, the projected distance values brought on turbulence and and you were always able to sell for a profit if you were starting to short 7-pips out and added to your short every 10 pips further out. Even the worst location did come into money by 27 pips at the end, and the most abuse to endure would had been a total of 77 pips on the first position.
Currently there’s a projected distance value at 1.1707.
The 1.1648 has no extended line on the right and still registers (see short purple line on the right), because of the way I wrote the search. There was no low below and close below event. This may be a mistake or could be a benefit. It is interesting to note that the value itself at 1.1648 is awfully close to the previously mentioned 1.1651 overbought neckline.
4. The Overdrive
I have talked about the possibility that the overdrive lines on the 4H charts may end up looking rudimentary. The circled values sync up much better on a 15-min chart, see the previous posts.
The point here is that if the price reacts on cue to these hourly E-32 displacements, they verify the presence of the E-32 channel.
Why did I post these images saying that this was the starting of a leg down?
The new consolidation level of 1.1849 was crossed over down and since this level printed, price never made it to overbought.
2. Look at that RSI2 sequence of two red numbers and two magenta ones.
This meant 4 hours of heavy selling, which is the move that starts off new a leg down. The previous, 200-pips selling looked like this:
Two red numbers followed by two magentas (end of leg A) – and at the end two red numbers followed by two magentas (end of leg C). The B-s and green verticals had to be ignored in between.
These plots are now part of the RSI2 Basic’s behaviour under embedded overbought conditions.
Furthermore, when I knew that the unemployment numbers were coming out at 13:30 local time, and the 4th number was printing, the danger was ending the sequence. So I was buying.
Yet, the buying aborted the ending sequence so I knew that I had to sell everything off before the hour ended. Since I was already short, I didn’t go short again – but I could have added some, for sure. Others may not have the same indicators, but they are looking at the same clock.
There was also the fact that the Green River gave support two times already – see earlier, so the third time had to be the charm.
If you look back at the last orange image, we have maximum 2 more hours left from the selling, and the clock is about to roll in 2 minutes. I’m looking to see 2 magenta numbers next – two hourly RSI2 HL2 readings below 16. If this hour ends up being up, we’ll get a fresh count, and so the selling shall continue until it manages to fetch itself a symmetrical ending – or bumps its nose into the overdrive line – darn it, it just did!
The first oversold is a buy for a squaring back to the oversold neckline – see the cover level of 1.1765 in brackets.
The second oversold is not a buy until below the projected distance the move generated – currently at 1.1749, and the last consolidation level was at 1.17348
Today you are good till 1.1744 and perhaps change.
The overdrive lines come with the 2Fractals_15min routine.
They are the red on the top and the dark green on the bottom.
I figure them from the displacements of the hourly E-32: + – 2.2 x fluctuation maximum.
One interesting fact is that the 200-pip pullback from the top fizzled out at such a level (in a still embedded overbought market), and another interesting fact is that the current double top also coincided with the inability to shift buying into overdrive.
I have made an effort to plug in at least the values on the 4H chart. Think of it like a flexible channel.
I would consider making plots, but I cannot add them to the existing routines, and they may end up being too coarse anyways because of the large pauses in data flow.
Back to the previous lesson, you can see how the theories worked in real time today, the 1st break above overbought was a sell starting 1.1819 from where the squaring went back to the overbought neckline.
The second move back above was not a sell as I said, and with this article you have a much clearer picture in your had about what the long exit would be: a failure at the overdrive level.
I was buying the keel-back, but should had set my mind on the overdrive instead of scaling out by 1.1840 – this is what bias does to you.
Picture shows the price bouncing off the Green River twice