If (and that is always a big IF with these formations) a contracting triangle is unfolding from the August 6 low then yesterday most likely ended the “C” wave.
I had originally thought that “C” had ended on August 24th. Surprise! From Connie Brown’s Technical Analysis for the Trading Professional: “Wave C within a triangle is very sneaky. It usually takes the most time to develop, and every time you think it is complete, it comes back to form another leg in the complex structure.”
So why do I now think that “C” is complete? Five reasons. One; a technical “sell” signal has been generated on a divergence between the RSI and secondary momentum indicator I follow. Two; price turned at a resistance cluster (described in yesterday’s post). Three; momentum has turned down as illustrated by the change in direction of the Derivative Oscillator indicator. Reasons four and five must wait for the completion of today’s trading. If we don’t break Tuesday’s high then we will have both a “fractal” top and a “squat” bar within two bars of the fractal (as described by Bill Williams in his Trading Chaos book).
Let’s see if we get those last two items today, remembering that those “C” waves within triangles are sneaky (as is the market itself)!
No comments:
Post a Comment