EURUSD—rally

The pair did drop to 1.2152 yesterday where I should have bought but it got away from me. That was close enough to my 1.2130 that I blogged about yesterday that I believe it means the B wave ended.

This morning it has hit its head on 1.2304 and fallen off a bit but let's see what happens next.

If this is an Elliott Wave zigzag (three-wave) correction, then there are four additional rules that have to be in place according to Prechter and Frost. First, wave A must subdivide into an impulse or leading diagonal which it has. Second, wave B subdivides into a zigzag, flat, triangle or combination. It looks as though B is a zigzag. Third, wave B must never move beyond the start of wave A. It didn't. Finally, C is always an impulse or diagonal which we don't know yet. When you think about it, those are pretty broad rules but that's what we have.

There are guidelines such as wave B retracing 50 to 79% of wave A if B is a zigzag. In this case, it retraced 53%. Other guidelines are that wave C can be about the same length as A or move beyond it (haha—very definitive). It's too early to predict where it's going until the pair breaks through some nearby resistance at 1.2304 and 1.2398.

Here's the three-hour 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.