(from the series, “The Averages Are Moving”)

Let’s talk about this purple colored reptilian creature for a moment, for to better understand the obstacles, we must.

This Sechuan Leguan aka 89 EMA can spit in you cabbage soup. Not that you would notice it.

The point is that it has an eight ball, which has three sides, square – says on the first triangular side, spike on another and let go on the third.

No, I don’t know how Milligan comes here.

The act of squaring – examples

This squaring that takes place at this EMA is an opportunity to dump excess longs/shorts for 20 to 50 pips better price.

A let go is what follows a squaring – and at times they appear as a combo like on the image above.

Practice their logic on the image below. The theme is squaring, let go and spike always in this sequence, and sometimes you get multiple spikes.

Notice the fresh high before a spike on the upside and a lower high that brought on squaring instead of another spike.

Hopefully you are starting to understand now the difference between the racer and the eraser.

Appendix

…

Notice the inside bar 2x fork lining up with the Iguana for a possible spike.

spike ~ candle closing back up / down by 12-14 pips+, stands out and occurs out of medium term overbought / oversold – or originate from a reptilian but the latter is in the direction of the movement, not against it

   if (High[i+1]-Close[i+1]>140*Point && High[i+1]>High[i+2] && High[i+1]>High[i] && stoch30[i+1]>35 && High[i+1]>iMA(NULL,0,89,0,MODE_EMA,PRICE_MEDIAN,i+1)){
      ObjectCreate("Objeceat"+DoubleToStr(i)+DoubleToStr(3), OBJ_ELLIPSE, 0, Time[i+2],  High[i+1], Time[i], Close[i+1]);
        ObjectSetInteger(0,"Objeceat"+DoubleToStr(i)+DoubleToStr(3),OBJPROP_COLOR,clrCrimson);
         ObjectSetDouble(0,"Objeceat"+DoubleToStr(i)+DoubleToStr(3),OBJPROP_SCALE,.045);
        ObjectSet("Objeceat"+DoubleToStr(i)+DoubleToStr(3),OBJPROP_BACK,0);
        ObjectSet("Objeceat"+DoubleToStr(i)+DoubleToStr(3),OBJPROP_WIDTH,8);
   }
  
  
     if (Close[i+1]-Low[i+1]>120*Point && Low[i+1]<Low[i+2] && Low[i+1]<Low[i] && stoch30[i+1]<65 && Low[i+1]<iMA(NULL,0,89,0,MODE_EMA,PRICE_MEDIAN,i+1) && Open[i+1]>Close[i+1]){
      ObjectCreate("Objeceat"+DoubleToStr(i)+DoubleToStr(3), OBJ_ELLIPSE, 0, Time[i+2],  Low[i+1], Time[i], Close[i+1]);
        ObjectSetInteger(0,"Objeceat"+DoubleToStr(i)+DoubleToStr(3),OBJPROP_COLOR,clrDarkGreen);
         ObjectSetDouble(0,"Objeceat"+DoubleToStr(i)+DoubleToStr(3),OBJPROP_SCALE,.045);
        ObjectSet("Objeceat"+DoubleToStr(i)+DoubleToStr(3),OBJPROP_BACK,0);
        ObjectSet("Objeceat"+DoubleToStr(i)+DoubleToStr(3),OBJPROP_WIDTH,8);
   }
  

The show down of the titans.

First the findings.

I marked up in gray abrupt bursts above 59 CI and reaches over 65 CI (7–sample).

(ChoppinessIndex(7,i)>65 && ChoppinessIndex(7,i+1)<65) || (ChoppinessIndex(7,i)<59 && ChoppinessIndex(7,i+1)>59 && ChoppinessIndex(7,i+2)<59  && (ChoppinessIndex(7,i+3)>54 ||  ChoppinessIndex(7,i+2)<50))

I also plotted the by now filtered extension projections, but the basic idea is still having a qualified move (large enough during a time limit) pointing to 50% more to be accomplished further down the road.

iHigh(NULL,240,i+3)-iLow(NULL,240,i+1)>FSize*26*Point && iLow(NULL,240,i+1)<iLow(NULL,240,i+3) && iLow(NULL,240,i+1)-(iHigh(NULL,240,i+3)-iLow(NULL,240,i+1))*.5

The last change I made was changing the ATR filter to a fixed size measurement.

Now, the images & the conclusions.

Enter with a size that can bear draw down of 60 pips. At 60 pips draw down from the consolidation level (Enter) if price went against you, hedge. At 70-pips you double the size of the counter holdings. You hold them into the next extension fill, where you scale out. You take off the original holding 40 pips back from the extension fill level (see article about Squaring).

Yea, that’s all I’ve got right now.

bonus image 1

bonus image 2

bonus image 3

– developed for you –

Only this indicator or combination with others?-

By itself is ok

This looks so nice…. What are the rules?

Put on the two MAs
67 exponential median Maroon

207 exponential median Green

consider the configuration and the price’s relationship for a preferred side to play

you can use Maroon for a target, and Mr. Green as well

look at how the last wave structure started from the cover longs area wave 1, 3 and 5 all ended in selling going crazy – to cover shorts

currently in a volatility whip where the hourly rsi maxes out on the upside then on the downside

this was the volatility whip – the purpose of this motion is to calibrate the market + work up some volatility for the next move (it brings the starting point closer to Maroon)

the volatility whip isn’t part of the wave structure

God Almighty only works in the direction of the current wave structure (a continuation)

you can see that the indicator did not call the cross down a short, because the longer term stochastic was too oversold

I had written the filter right the first time around (refer to what I said about using Maroon as a target)

wave 1 started when the whip finished (after 5 waves down) and it was a wave 1 because it managed to reach beyond Maroon

wave 1 always fails back to the other side of Maroon (minimum) or 2 dojis down (normally) or it can even make a lower low if necessary

wave 2 came down to check in with the unfinished extension fill at 1.1179 before traveling abroad

the rally tagged the Mean (green line) – aka Secondary Target

“the Green River can stop a move, any move”

believe or not, you are now in a wave 3 up – the count remains until the low of wave 2 gets violated at 1.11683

and now whilst nobody understands what is happening, you can

…

price drove into the forest and hit a tree

…

…

Ok, I surrender. The market is trading away from the peak charge – it was back tested at 1.1249. The smallest move came out of this kind of charge was 126 pips, but there are examples for up to 250 pips.

The next two support lines down are 1.1191 and 1.10949

I’d like to propose the utilization of the extension fills for squaring.

There are not many points on the chart where you can have 40+ pip reaction with a guarantee.

Say you start following rules for a change.

• You figure a maximum personal risk.
• You know your risk off level at the time of placing the orders.
• If you get hedged in, you wait out the opportunity for squaring.

In real life, this is how it goes:

You open a position with 1/3 of your personal risk. The market moves against you. You add another 1/3 11 pips out. Market surpasses. You place your last 1/3, again 11 pips out. You knew at the start that you are going to be forced into a hedge.

Your risk off level should be 42 pips away (fluctuation maximum) from your 1st order, 31 pips away from the 2nd and 20 from the 3rd. With even chunks of positions you would have a draw down of 31 pips overall locked in.

The hedge would be sacred until the next projected distance level – encounter.

You are coming up against the green lines & values.

You close off the long hedge at 1.1128 and the shorts 40 pips lower (1.1088).

This way you would have some gain despite of the swaps charged in the meantime.

Now, what would happen if on top of opening up the hedge you would also add to your naked position 11-pips out (at 1.1139) another 1/3?

You already know the short exit level, so why not make that 51-pip gain?

What would happen if the market was to rally another 27 pips after going naked?

You already placing a pending short for the duration of squaring 11 pips out at 1.1405. Place another one as well 22 pips out and make that 62 pips trade as well, not?

The last such squaring opportunity happened on Friday.

The 51, 62-pip trades were not hit, but they should be taken off now that the squaring move hit its 40+ pip target.

I’ll let you figure the values on the last image.

Where do you take off your short hedge?

Where do you add to your short?

Where do you add for the 2nd time?

How much was the excess if the high came in at 1.10077?

The commuter market is any market that is not embedded in the overbought / oversold field and is sustaining above / below the mean.

The name of the game in the following example is buying a swing low and holding for 7, maximum 8x 4 hours before selling.

Without going into the difference between exhaustion and beat (the beat requires a 4H low taken out) and other things such as what is a dip, what is a deep pullback, I present you with the meat of the upside action.

1. You see a swing high, you get excited.
2. You want to see the 7-sample choppiness above 50 to ready your entry.
3. You scale in
4. You abide your time, and start scaling out in during the 7th 4-hour print.

Your code:

for (i = 100 ; i >= 0; i--) {
   swinglowcounter++;
   swinghighcounter++;
   
   if (Low[i]>iMA(symbol,0,52,0,MODE_EMA,PRICE_MEDIAN,i) && iFractals(symbol,0,MODE_LOWER,i) && !eu[i+1] && !eu[i+2] && ChoppinessIndex(7,i)>50 && ChoppinessIndex(7,i+1)>48 ){
      j=i+1;
        while (!iFractals(symbol,0,MODE_LOWER,j) && !iFractals(symbol,0,MODE_UPPER,j) )  j++;
        
        if (iFractals(symbol,0,MODE_UPPER,j) || (iFractals(symbol,0,MODE_LOWER,j) && Low[j]<Low[i]) ){
      
         swinglowcounter=1;
                ObjectCreate("SWING"+i,OBJ_TEXT, 0, Time[i], Low[i]-30*Point);
                 ObjectSetText("SWING"+i, swinglowcounter, 23, "Arial Black", clrNavy);}
         
      }
   if (swinglowcounter==7 || swinglowcounter==8 ){
      ObjectCreate("SWING"+i,OBJ_TEXT, 0, Time[i], Low[i]-30*Point);
                 ObjectSetText("SWING"+i, swinglowcounter, 23, "Arial Black", clrNavy);
   }
  
}

What is a support? A memory of price being moved by buying.

The materialization of a support / resistance is price slipping off the trail counter the direction.

Although a reversal down may start with a lower high, what I am monitoring for is a lower low – and on a 5-minute chart.

The idea is that if these are holdings, the seller – or someone else – may step in again to defend the position.

Here’s my automatized version.

I invented different colors for those buys that occur below S1 support and not close enough to the lower limit.

Olive Green – not the best location.

Green – apparently when green overlaps Green, it becomes blue. Gotta love computer logic.

The Million Dollar question today is how far this Wave 5 up going to get?

Downside targets are easy to figure at 50% and 80% length of the range.

I do have a problem with picturing a break here.

I already showed you that someone went short at 1.1380 & 1.1360

Dip buying isn’t promoted here because of those legs spiking through Mr. Maroon.

There is energy to make a beat of the current exhaustion move up, yes – but the last Exhaustion -> Beat -> Break sequence hasn’t been completed yet.

I’m of the belief, that this Wave 5 up would remain a lower high.

The last higher low on the downside went like this:

Exhaustion – Beat – Exhaustion

No break after the first beat, and later no beat followed the exhaustion either.

The break of the beat usually happens within 4-7x 4 hours. There has been 14x 4 hours since the beat was made.

Setting up the charts.

Gauge 1:

Weekly Comfort Levels

Lots of info here.

The last two weekly peaks show a continuation divergence down -> likely lower high. Does not mean that a slight beat of the recent high isn’t possible still. You can also see the reversal divergence between the last two lows made in the oversold area.

Support & resistance levels would be re-calibrated based on the last 15-min consolidation come Sunday night (with the new ATR), so ignore them for now.

Based on recent history, there would be another week making a try with the overbought zone, likely the one coming up just now.

The story is currently trying to sustain in the overbought zone, but that’s not a given at all.

Gauge 2:

4H

Price is above Mr. Maroon, so we are interested in the increment of the highs.

The last increment was less than 25 pips or more than 64, so it is printed in Gray – dip buys are not promoted here. A break out would be a buy even a couple of pips above, and the projected distance of this last move up is at 1.1445 – just keep it in mind, have a good trail stop and be ready to bail if price comes back by 9-10 pips below the high.

As long as price stays above Mr. Maroon, we do not have a Wave 1 down yet.

The Green one is the mean, where we would expect price to return to once Maroon gives its consent.

Gauge 3:

15 min

The 15 min shows the range that was expected to be failed. 1.1380 was a peak.

When the Safety concern was overrun, that made this move a qualified Shot Over the Bow – which is typical of a Wave 4 down. If price stops here, Wave 5 would have the opportunity to make a run for the projected high.

We are still in Strength Buy mode, as the bottom left ticker shows, but if price was to meander lower, this move would be a qualified Wave 1 down, and would expect the rally (Wave 2 up) to fizzle out.

Gauge 4:

1H

The 1H shows a break out that occurred at 1.1261 – then a back test of that along with the 2nd doji up. The close of that doji + maximum 4 pips is where I would strongly consider getting out of the Wave 2 up – if that is what’s coming next.

I am a bit bothered by the stochastic bars making a print on the high, for the market rarely finishes on a high note.

Gauge 5:

The 30-min doubles down on the importance of the break at 1.1261 with the highlight, and gives accurate distance readings from the mean putting the divergent highs to 6.7x and 6.4x stretch from the mean.

Most recently price made a move back down from 5x stretch to 3x (quite a bit of volatility crush).

The 4×4 hours of deflation increases the possibility of a rally ensuing next just as what happened the last time (2×4 hours up) – see blue line below.

Buy Weakness is still in effect and disregard the Short reading that is based on the location of the Energy bands that were unable to keep pace with this move up. The cover level just reinforces the notion that if there would be a break out, it would be a failed one. Refer to its maximum projection earlier.

Gauge 6:

5 min

This chart shows the Buy level of below 1.1287-, and price has made 5-6 attempts trying to get lower – unsuccessfully.

The hedge level was not violated. The upper hedge level of 1.1404 brings attention to the possibility for a squirt above, and 1.1351 should serve as a resistance if this is going to remain the same wave structure to the downside i.e. we would get a wave 2 of Wave 1 down.

Current downside hedge / risk off level is at 1.1252

Advice / comments here & there.

Hi Mac
Is it going to be a reversal?

Upper reversal stands for the bottom of the reversal zone (85%-95%) – price is making a turn in the overbought zone in this field. Above 95% odds are a new high, coming back below 85% – odds are losing the overbought status. The largest moves happen out of losing overbought / oversold.
Target 1: median at 50%

Target 2: the opposite end (overbought -> oversold)
You are definitely looking at the right chart
Fresh overbought/ oversold is toxic, would get rejected out of the zone

After 3 daily closes inside the overbought/oversold field price is “embedded” and higher highs / lower lows are guaranteed => overbought / oversold safety

…

Something I can’t explain: same account, same broker, same MT4, same instrument, same data, yet my Tosiba Laptop puts a vertical powder blue on the previous block too, how do the same calculations end up with opposite results?

The Warning

Hi,
Be very careful here, this mean reversion has not been gaining traction, you got an extensive consolidation instead, which may be eyeing a number close to 1.12 or even beyond.At the moment price appears to be in a bear flag just under the 3x stretch marker, purple haze, if the bear flag plays out, price should dip into the green box, and that would mean a valid Wave 1 down crossing over Maroon.
After 4x stretch from the mean there are no Primary Sells any more, hitting the same cyan line would become a Spiral Buy and you would have to buy instead of sell. Only secondary sells exist, so you would need the market to first make a peak, then pull back significantly, then re-visit that peak before re-entering.You would be looking for the beat in general, but in extremes, the retest may fall shy of the absolute peak.
Mac

The unfold

Today the price went outside the energy bands and tagged from below a previous support level (orange line)

Why am I not expecting any follow through here?

Because the daily energy is still in dire straits.

The 4-hour energy may have had a full charge, but the burst out could never have amounted to more than a beat.

What is the maximum size of a beat?

64 pips would had meant progress. 42.5 pips would just remain a beat.

The spiral buy was not reached, and the 8 hours of allowed rally time would run out in another 2.

…

These were – the safety concerns

…

Hedge level values and held out last qualifying magenta levels for better visuals & info

…

Near Misses

The spiral buy level was missed by less than a pip

The invocation top was missed by a hair, thus the break out level of 1.1194 did not get re-adjusted

Wave 5, just as Wave 3 prior ended up with a successful break. Going with the example of Wave 3, price should come back down to the latest S3 number.

…

The 4H got exhausted one more time. The beat came on the “3” as was expected. Nothing to say not to mean revert any more.

EU = Exhaustion up

ED = Exhaustion Down

F = Full charge
The counter goes from the last exhaustion for 12×4 hours = 2 days => the beat should occur within this period, 3 is a likely time for it – see the last one

Understand what happened here when the market got a small lift over the weekend from below the continuation level.

An automated re-visit of the top was put in place where the market makers would get extra help from those buying the gap fill / continuation level of 1.1005.

What is a beat? A failed break out over a recent price extreme.

Why is this happening? Because there are physical limitations to what a market can do without consolidation.

For instance, when the 4-H energy gets exhausted, I plot the “sell the beat of / buy the beat of” text as well as EU which stands for Exhaustion Up (Not European Union). The exhaustion level gets surpassed by the little extra distance the commuting mean would provide (inertia). The beat fails the exhaustion level by surpassing then coming back through it.

These extremes always get a re-test that usually results in a small beat (see the prior one was 14.8 pips, this was 5.2). Can they expand on the size of the beat? Sometimes they do. Leave enough slack not to get stopped out.

I refer to fading the beat as Secondary entry while the exhaustion itself is the Primary entry. Since the Secondary is further out for the most part, it is the better location.

The exception to this beat was recently the higher low that defined that green-white trendline (I plot “missing beat” to highlight such event).

Now, concentrate on Volatility Crush. You can see that after a 3-bar drop, you would get a counter move there is always a 2x-3x 4-hour slot when the beat should materialize.

I was trying to explain this volatility AC/DC motion to someone and told him, “if you understand this, you understand something about trading”.

Where are we at now? At the 60% comfort level. There is no unfinished business on the upside. A mean reversion may commence from here.

…

The title reference

…

Now the beat is 8.7 pips

…

Looking for the perfect beat?

…

The buy signal of the Stochastic Bars Stripy was spot on.