Look at the weekly rectangle before the recent spike low to 76.45. One sees a high of 84.53 and low of 80.22 or 431 pips. Subtracting the 431 pips from the 80.22 low, one gets a target of 75.81, not far below the recent spike low of 76.45. However, that spike low quickly reversed. Price came back in the rectangle and pushed above its upper boundary. Psychologically, the market participants charged down, reversed en masse, and charged back up. Terrific herd behavior.
If price should maintain itself above the rectangle, the potential price target is 88.94. There is negative divergence with RSI on this chart just as there was on the monthly chart. However, before it could get there, price must overcome the downtrend line resistance, located today at 86.19.
Thinking about both the monthly and weekly charts, it is possible wave five ended at 76.45 (I would not bet the bank on this or anything relying only on Elliott Wave Theory but one could argue this wave count). However, if true, the next move would be up in an A wave.
Weekly chart support is at 83.4, 81.39, 80.59 and the egregious 76.45. Below that is not much support.
Here's the weekly chart.
© Dianne Fecteau, 2011. 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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