In the daily basically we can see the behavior of price since early May... a parabolic up movement followed by a sharp decline to test almost its previous low, when price bounced back to the upside. Using this tops I've drawn a trend line which is still valid as resistance. A few aspects for analysis from this chart: the july 13rd low @1.4331 provide a strong support zone but when broken, it acts as resistance as we can see in the chart below. Almost all august price struggle with this value when finally decided and broke down not without a retest the last day of the month. A new low was made (@1.3658 sep13 low) and price bounced to the upside to retest the 1.43s. In this upward movement, price defined a short term trend which I represent with a line. By today's bar, this trend line is breaking to the down side which would provide us a trade possibility to go short. Also stochastics has make a bearish reversal from the overbought zone. With a stop loss no further that the previous swing high, probably price would test its previous low so a possible target should be around this zone. Price might form a double bottom but if this low is broken, more than likely price will dive further. A break out bar would give some confirmation to this analysis. This trade is way to far to take by myself due my account size and the risk to be taken. A break to the upside could happen and a confirmation of a new trend would be if price take out its previous high.
In the 4H chart I found something really interesting for a short term trade. We are aware that the trend is down, either the weekly and the daily. But a long opportunity is glowing. Should I have to take the trade? Don't Trade against the trend is something that my head is screaming. Let's review and learn in the way...
The short-term trend in the daily is up while the longer-term trend is down. From its bottom, price has been developing an uptrend impulse 5 wave movement, or at least is what I'm seeing and by now its wave four is almost complete. A few confluence of events suggest that a wave 5 more than likely will be form:
-We have a 50% retracement holding, a previous resistance/support zone,
- 120 and 200 sma near and pointing up,
- convergence in MACD,
- stochastics almost at oversold zone,
- trend lines confluences with a possible price target zone which coincides with a previous strong resistance/support number.
- Fib extensions and projections also coincides with this zone as possible first target. A fib retracement from the higher timeframe is also around this zone.
Are all the odds in our favor? I could be death wrong but looks like a good trade opportunity. What would invalidate this setup? If price continues its decline and trades below the wave 1 high.
The plan would be placing an entry order to go long around 1.4110 (price is at 1.4086 right now), why? because we would like a further confirmation that price is trading in our direction. If we trigger at the market, price could continue its decline and stop us, while if price declines and triggers our order in its comeback, would be better.
Stop orders should be below the previous swing low from the entry. A wider stop could be below wave 1 high where as we know, if price trades below, would invalidate the elliot wave count.
Entry:1.4110
Stop: 1.3980
target1: 1.4440
risk: 130
reward: 330
risk/reward: 1:2.5
Will it work?
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