Archive for the ‘Wave B’ Category

Update on EURUSD and gold

EURUSD gradually formed a short-term bottom, and struggled to reach over 1.4300 last week, followed by a sudden drop to 1.4100 to the end of the week. I’m still thinking this is just B of b, meaning EURUSD will try 1.4385 to complete the upward flat wave b. But just in case the rebound had faded already, I set my stop sell order at 1.4038. I may cancel this order if I confirm EURUSD is still in wave b.

I prefer to think gold’s rally has not completely ended. The current nervous price action shows the characteristics of Wave 4. I did finer Elliott wave analysis in the 180min chart:

I give enough time to gold price to swing on the seesaw. There is a good possibility that gold goes down to $1460 level before resuming the rally.

Now focus on EURUSD

The last gold trade ended with a little over 1% profit after seeing as high as  9% unrealized profit. I think the way I pyramided the position was very good. But I clearly missed the ideal time for getting out.

If I ask myself now whether or not I should have booked at least a partial profit, the answer is yes. This is only an after-the-fact thought. We often say, “I knew this was going to happen!” No, we didn’t know (at least for sure). Our brains sometimes go as far as to rewrite our own memory.

Having said that, this was a good lesson for me to know how the commodity prices behave at the mania. Compared to currencies, the market is very small and the money is hot. So, it wiser to get out while we can even if the price has not reached the target level. What was tricky this time was that I think gold was not in mania, but silver was. I underestimated the effect of the raise of margin requirement on silver to gold positions. I know ECB’s press conference and Osama Bin Laden’s death might have ignited the market movement, but the condition for the correction was there when the margin requirement was raised for the first couple of times. Anyways, I need to thank the fact I left the market with some profit, and that I got some lessons.

Now I move on.

In general, I think trading from here requires a lot of cautions as I expect the price actions across the different markets to be turning the direction very often. I think I’d prefer taking profit early in this condition.

Looking at the sudden drop on EURUSD, I think it could be the beginning of the downward correction of b as I showed in this weekly chart:

This b is a part of the upward flat wave towards X in my speculation. And b has to come down at least to 1.30 level to be recognized as a dip in this big flat wave of X. Elliott Wave strictly defines that a B wave should be a corrective wave (zigzag, flat, triangle, or complex). In this weekly chart, I assumed b wave to be a flat wave: .a (downward, zigzag as I showed with a-b-c) – .b (upward, corrective) – .c (downward, impulse). One could also speculate b to be a zigzag that is composed of .a (downward, impulse) – .b (upward, corrective) – .c (downward, impulse), and in this case the target for both .a and b will be much lower than what I labeled in the weekly chart. As I was going to be short of EURUSD, I want to be on the conservative side. So I pick flat wave scenario, or shallower correction of EURUSD.

I know my analysis above is not the easiest thing to understand. Please refer to my introduction to Elliott Wave for the illustration of the main wave shapes.

So, I am waiting for the right time to enter EURUSD short position. The last week’s drop of EURUSD clearly shows the shape of impulse wave as I labeled (1~5 to a) in the 360 min chart:

Oh, I wish I could ride on the 600+ pips drop! But my trading span is not that short, so it was not my trade. I would wait for a significant rebound to b or 1.4550 ~ 1.47, and that rebound has to be a corrective wave, of course.

Some notes on EURUSD and gold

Some news and columns on Euro and Euro zone this week:

As always, I leave the analysis on those news and columns to professionals, but my general feeling is that Euro zone bought some time before the mid term risk. Nothing really is resolved. I think the big rally against US dollar of the last week is reflecting the situation well.

Here is my current Elliot wave count. A minor tweak from the last post is that now I am proposing that Wave b is not over. Wave b is drawing a expanded flat as A-B-C. So I would never long EURUSD from here. Just wait for the sign of the initial descent to catch Wave C.

I imagine that move from the last December has been confusing many swing traders. They were rather for day trader’s movements and not my market to trade. I’m just waiting patiently for now.

It’s been a while since I mentioned about gold. Wow, it’s been almost a year since my last bullish call on XAUUSD. I made some money by being long of gold in 2010, but I got cautious since it lost the characteristics of impulse wave though the price kept going higher and I was technically missing the opportunity. I’m still on the side of anticipating the mid term correction, and the lost momentum of the gold in the past weeks may be the sign of the beginning of it. I would still hold the temptation of going short of gold. What I’m aiming is the correction that is as big as going below $1200, and possibly to the Wave IV floor support in the chart below. I just need to take advantage of the fraction of the whole movement to make money. So, I just wait.

Real time trading tweets

The plan in the article may get rejected any time, so please check out my tweets on Twitter.

Current risk exposure:

"","","","","$29,058.30","","","","","","","","","","","","","","","","","","","","41.95%","","","2.00%","","","","","","","","","","","","","","","","","","","","","","","","","","","",""
Rational Move always use stop loss orders, and this is the worse case potential loss over the capital for the currently open positions. This is unrealized loss is less or equal to the risk exposure.

Capital growth

From recent 100 trades (%) The growth right before the 1st trade is set to 0%.
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Drawdowns

From recent 100 trades (%)
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Total returns

Since inception
(Aug 10, 2009)
Year-to-date Quarter-to-date
0% 0% 0%
This is a normalized value: the return on each trade is normalized against the capital just before the trade execution. This way, it is eliminating the effect by the capital change from deposits and withdrawals. The calculation thus reflects the trading performance of each trade. The value does not contain unrealized profits and losses. RM's trading strategy never risks more than 5% of the present capital. Not including subtraction by tax.

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