Some suggestions for trading an Elliott countertrend move:
You say, "If this is a C"...
Let's move inside one degree. The initial pop today should be viewed as an 'A' to start. For the moment, we will further assume, until the odds no longer favour it, that it will not be a flat correction; in other words, that the 'C' that goes with this 'A' will make a new high.
So, once this 'A' runs its course, look for at least 2 of 3 things on the 'B' retracement:
1) A likely fib target -- .50, .62 -- these are the most common if we are to get a brother leg. .38 is awfully shallow for a 'B' (rather than a '4'), and .78 +/- is the last hope.
2) It also happens to hit support at such a retracement.
3) A minor bullish divergence in sentiment forms at such a retracement and/or support.
After all this silliness of the 'B', which is the most unreadable wave type in Elliott, we should launch into a 'C' -- the phrase we often use is brother leg.
The most likely fib targets for the 'C' relative to the 'A' are 100% and 162%. On these 'C' moves, look for 3 of 4 things to help you get out of longs and get into shorts:
1) A likely fib target as just discussed.
2) A likely fib retracement vis a vis the previous leg of higher degree. In our case, this would be vis a vis the down we are correcting against. The question one is asking is "How far could this A-B-C correct?" if it is but a correction.
3) It also happens to hit resistance at these targets.
4) A minor bearish divergence in sentiment forms at a target.
Most of the above holds true even if you are wrong and it's not an A-B-C countertrend, but a 1-2-3-4-5 impulsive move: you will have traded the 1-2-3 legs thinking it was A-B-C. |
