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05 Sep 2011 19:27:22 -0000 Sender: Divergence@yahoogroups.com MIME-Version: 1.0 Mailing-List: list Divergence@yahoogroups.com; contact Divergence-owner@yahoogroups.com Delivered-To: mailing list Divergence@yahoogroups.com List-Id: Precedence: bulk List-Unsubscribe: Date: Mon, 5 Sep 2011 15:21:37 -0400 Subject: [Divergence] USD/CAD, 9/5/11, 4 HOUR, WEEKLY, MONTHLY [3 Attachments] Reply-To: Divergence@yahoogroups.com X-Yahoo-Newman-Property: groups-email-ff-m Content-Type: multipart/alternative; boundary="----=_NextPart_001_0072_01CC6BDF.833AF560" ------=_NextPart_001_0072_01CC6BDF.833AF560 Content-Type: text/plain; charset="us-ascii" Content-Transfer-Encoding: 7bit Monthly; Price has most recently conclusively established the low EW B and is now searching for the high of wave C. Previously price has been tracing 3 wave corrective patterns. Most recent historical wave A and B were both 3 wave corrective events. An analyst is now most interested in anticipated price behavior at the far right chart edge and subsequent to the latest fractal low at wave B. Therefore the issue is what pattern will be traced by price incident to its search for wave C high? There are only two possibilities, impulse or corrective. A complete impulse pattern has a total of 8 waves, waves 1, 3 and 5 are motive waves in the direction of the trend which may be either up or down. Waves 2 and 4 are 3 wave corrective patterns. The last 3 waves, A, B and C correct the previous motive waves and may be either 5 or 3 wave events. Starting at the monthly chart high RSI/MACDs and fractals have traced the first corrective pattern lower, a 3 wave event. Since the chart low, price and indicators have trace waves A and B also 3 wave events. Study of smaller time frame charts provides insight as to the exact nature of price activity/pattern since the most recent wave B low in the monthly period. Weekly; Corrective waves A and B more clearly trace 3 wave patterns than observed in the monthly period. There are two complex RSI structures the most recent M above the 70 line suggests higher price above wave A. The more remote complex W below 30/20 suggest price will later close below wave C chart low. There is one fractal high since the fractal low of wave B which suggests a possible change of trend from down to up. 4 Hour; Green vertical line identifies wave c/B low observed in the monthly and weekly periods. Price has since traced a new IMPULSE partially completed pattern with price presently searching for wave 5 high in the 4 hour period which will also be wave 1 high in the weekly/monthly period. Once wave 5 high is conclusively established corrective waves A, B and C will follow correcting part of wave 1 in the weekly period. The low of corrective wave C will also be wave 2 low in the weekly period. Blue vertical line establishes wave 3 high (RSI and MACD values highest) which always must occur at wave 3. Red vertical line establishes corrective wave 4 low with a RPD which introduces the last impulse wave 5 higher. Wave 5 will have 5 waves like all impulse waves and may be extended. Many traders do not yet understand that a trend change from down to up has occurred and will therefore aggressively short the high of wave C/2 in the weekly. The A, B, C wave 2 correction may exceed .786 of the prior up cycle and erase much of the long gains from wave c/B low observed in the 4 hour period. A lower risk long trade will occur at the low of wave c/2 in the weekly period. Enter an alert at 61.8 or greater for a possible long at that level. The A, B C correction down will offer a short opportunity which is a higher risk trade since it is against the uptrend. The present longer term correction has revealed itself as a Flat. Most often we see an upright flat correction like that shown on the chart drawing. However this Flat correction is an inverse of the pattern often observed. Instead of price moving lower sideways price will be moving higher sideways the opposite of the drawn pattern. Price will later retest Wave A high in the monthly. Price in its search for Wave C high will be tracing multiple full 8 wave patterns higher. It is important to recognize that a Flat correction always has 3 waves in A and B waves and 5 waves in Wave C. In this example price has started Wave C with four of the 5 impulse waves present in the 4 hour period. Comments; Price and indicators always remain obedient to the EW structure. Once the analyst objectively determines the exact location of price in the long, medium and shorter periods a lower risk trade may occur. The most difficult EW patterns to trade are corrective patterns because they may assume unusual shapes (inverse Flat) with mixed 3 and 5 wave patterns. These charts are a prime example of the confusion which may occur. I trust this analysis has offered some clarity to an initial confusing EW price pattern/structure. It is important to observe that an upright 8 wave impulse pattern is always a head and shoulder pattern, the most common price pattern and more important a complete EW cycle. Wave 3 is always the left shoulder, wave 5 the head, corrective wave B the right shoulder. RSI/MACD values are always the highest at wave 3. 20 SMA is farther from the 200 SMA at wave 3 or extended wave 3 and generates an SMA internal divergence between wave 5 SMAs values. There is always a CND between waves 3 and 5. There is always a RSI RPD at wave 4 low and a prior lower fractal low. The rules for RSI and MACD values in corrective waves are different. Wave C most often reports the highest/lowest RSI value. MACD often reports it highest/lowest value at wave A. Corrective waves often do not generate divergences like those observed in the first 5 waves. The lack of clarity among indicators behavior suggest market uncertainty during corrective phases and complicates accurate trading. When there is uncertainty of price accurate location in the EW structure do not trade. With respect to trend change issue, this is often resolved in a smaller time frame which traces a price pattern (corrective or impulse) which is different than the previous pattern being trace by price. Loren ------=_NextPart_001_0072_01CC6BDF.833AF560 Content-Type: text/html; charset=US-ASCII Content-Transfer-Encoding: 7bit  
[Attachment(s) from Loren Morlan included below]

Monthly;

Price has most recently conclusively established the low EW B and is now searching for the high of wave C.  Previously price has been tracing 3 wave corrective patterns.   Most recent historical wave A and B were both 3 wave corrective events.  An analyst is now most interested in anticipated price behavior at the far right chart edge and subsequent to the latest fractal low at wave B.  Therefore the issue is what pattern will be traced by price incident to its search for wave C high?  There are only two possibilities, impulse or corrective. 

 

A complete impulse pattern has a total of 8 waves, waves 1, 3 and 5 are motive waves in the direction of the trend which may be either up or down.  Waves 2 and 4 are 3 wave corrective patterns.  The last 3 waves, A, B and C correct the previous motive waves and may be either 5 or 3 wave events.

 

Starting at the monthly chart high RSI/MACDs and fractals have traced the first corrective pattern lower, a 3 wave event.  Since the chart low, price and indicators have trace waves A and B also 3 wave events.  Study of smaller time frame charts provides insight as to the exact nature of price activity/pattern since the most recent wave B low in the monthly period.

 

Weekly;

Corrective waves A and B more clearly trace 3 wave patterns than observed in the monthly period.   There are two complex RSI structures the most recent M above the 70 line suggests higher price above wave A.  The more remote complex W below 30/20 suggest price will later close below wave C chart low.  There is one fractal high since the fractal low of wave B which suggests a possible change of trend from down to up.

 

4 Hour;

Green vertical line identifies wave c/B low observed in the monthly and weekly periods.   Price has since traced a new IMPULSE partially completed pattern with price presently searching for wave 5 high in the 4 hour period  which will also be wave 1 high in the weekly/monthly  period.   Once wave 5 high is conclusively established corrective waves A, B and  C will follow correcting part of wave 1 in the weekly period.  The low of corrective wave C will also be wave 2 low in the weekly period.   Blue vertical line establishes wave 3 high (RSI and MACD values highest) which always must occur at wave 3.  Red vertical line establishes corrective wave 4 low with a RPD which introduces the last impulse wave 5 higher.  Wave 5 will have 5 waves like all impulse waves and may be extended. 

 

Many traders do not yet understand that a trend change from down to up has occurred and will therefore aggressively short the high of wave C/2 in the weekly.  The A, B, C wave 2 correction may exceed .786 of the prior up cycle and erase much of the long gains from wave c/B low observed in the 4 hour period.  A lower risk long trade will occur at the low of wave c/2 in the weekly period.  Enter an alert at 61.8 or greater for a possible long at that level.   The A, B C correction down will offer a short opportunity which is a higher risk trade since it is against the uptrend. 

 

The present longer term correction has revealed itself as a Flat.  Most often we see an upright flat correction like that shown on the chart drawing.  However this Flat correction is an inverse of the pattern often observed.  Instead of price moving lower sideways price will be moving higher sideways the opposite of the drawn pattern.   Price will later retest Wave A high in the monthly.  Price in its search for Wave C high will be tracing multiple full 8 wave patterns higher.  It is important to recognize that a Flat correction always has 3 waves in A and B waves and 5 waves in Wave C.  In this example price has started Wave C with four of the 5 impulse waves present in the 4 hour period.

 

Comments;

Price and indicators always remain obedient to the EW structure.  Once the analyst objectively determines the exact location of price in the long, medium and shorter periods a lower risk trade may occur.  The most difficult EW patterns to trade are corrective patterns because they may assume unusual shapes (inverse Flat) with mixed 3 and 5 wave patterns.  These charts are a prime example of the confusion which may occur.  I trust this analysis has offered some clarity to an initial confusing EW price pattern/structure.

 

It is important to observe that an upright 8 wave impulse pattern is always a head and shoulder pattern, the most common price pattern and more important a complete EW cycle.  Wave 3 is always the left shoulder, wave 5 the head, corrective wave B the right shoulder.  RSI/MACD values are always the highest at wave 3.  20 SMA is farther from the 200 SMA at wave 3 or extended wave 3 and generates an SMA internal divergence between wave 5 SMAs values.  There is always a CND between waves 3 and 5.  There is always a RSI RPD at wave 4 low and a prior lower fractal low. 

 

The rules for RSI and MACD values in corrective waves are different.  Wave C most often reports the highest/lowest RSI value.  MACD often reports it highest/lowest value at wave A.   Corrective waves often do not generate divergences like those observed in the first 5 waves.  The lack of clarity among indicators behavior suggest market uncertainty during corrective phases and complicates accurate trading.  When there is uncertainty of price accurate location in the EW  structure do not trade. 

 

With respect to trend change issue, this is often resolved in a smaller time frame which traces a price pattern (corrective or impulse) which is different than the previous pattern being trace by price.

 

Loren

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Attachment(s) from Loren Morlan

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