On the daily chart below I've traced out an Elliott Wave (EW) count. You can see that one could make the case that the pair is completing or has completed a three wave correction (wave 4) off the wave three low at 1.4785. As a matter of fact it's almost a classic looking count. However, is circle c over? Looking at the nature of the correction, it could be a zigzag and circle c could extend further. A guideline is that c of a zigzag is often about the same length of a but it has already exceeded that and could go further. If it does, I calculate that it could end from 1.5681 to 1.5763. At those levels the probability for a successful short is very high. If circle c has indeed ended, and some believe it has, then the price cannot exceed 1.5486. The pair is currently at 1.5428. A short here would have to have its stop above that point which isn't egregious and the potential payoff is good (back to at least 1.4785). A long would ideally place the stop below 1.5337 so the risk is a great deal more (this is all calculated off the daily chart—shorter term charts show a different story).
Here's the daily chart:
© Dianne Fecteau, 2010. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
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