Hello traders, here we have a bullish 5-0 pattern on the 4h timeframe with NZD/USD.
Price just formed a valid C point at the minimum 1.618 level which aligns with a valid bearish shark pattern, which has opened up a shorting opportunity from C to D.
The measurements for a valid 5-0 pattern are detailed below. B: 1.13 - 1.618 C: 1.618 - 2.24 D: 0.50
Taking a look at the daily chart below price is still respecting the upper resistance trendline.
If we experience a successful short position from C to D, this will open up an opportunity to buy in the future.
I hope you all have an excellent week and safe trading!
Lewis, I'm posting my analysis here for everyone to see the continuation of our conversation. Essentially, the issue I see is that you aren't actually looking at the entire leg down, where the move started from.
The box in blue is essentially the spot you are expecting a significant reversal, based on harmonic fib patterns. I believe you will be correct in that we might get some liquidity there, I do not expect a trend change until the down leg start is tested.
Once I've identified the proper leg being retraced, I can then find it's high. From there, I can identify the move up that created the high, and find the swing points that are untested, by shifting to a smaller time frame.
The last level of support that was lost, and untested, becomes the leg start of the leg down. Price always moves from leg start to leg start. There is no reason to get short until a level of support is lost, and generally, until a leg start is tested, price maintains it's trend up to it. If you have any questions let me know for further understanding.
UnknownUnicorn461520
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I've also added the scenario where we get liquidity and lose support.
boon86
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@pip_train, nice explaination
UnknownUnicorn461520
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@boon86, No problem. it's a deeper concept of support and resistance that is generally unknown to most traders. I have access to about 15K books on trading, and out of all the books I've researched, the Art & Science of TA is the only book that vaguely recognizes that the classical model of S/R is not accurately depicting what happens during price progression.
catrionaforex
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@pip_train, I have read a lot of information on S/R, Fibs, Elliott Waves but this is the most informative explanation of price movement I've ever read. Could you explain what you mean by 'Price always moves from leg start to leg start', and how did you know that the 7300 area would be tested? Many thanks for your help :-)
UnknownUnicorn461520
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@catrionaforex, I knew that the 7300 would be tested based on price containment in relation to it's current leg (trend). Classical S/R, EW, and Fib uses are typically generalized and speculative. Classical S/R teaches that levels of support and resistance are more localized to specific static price zones. The idea of pin bars and false breakouts evolved from this line of reasoning, and attempts to explain price action from a seemingly speculative process, void of logic. In truth, S/R levels are much more dynamic. This is why traders with a classical understanding find themselves getting stopped out when those 'impulse' moves occur. Yes, I said impulse to Segway into EW styles. From my view, EW offers overcomplicates price action. The problem I find EW traders having is with all the minor waves, a lack of understanding in how timeframes fit together, and they tend to use a classical approach to S/R. As I said, price moves from leg start to leg start as it progresses through macro trends. I do not fully understand the reasoning behind this phenomenon, but I do know how to recognize it. In short, leg starts are levels of untested S/R that in-turn create a new leg. I knew that 7300 would probably be tested, because how understanding S/R and containment legs.
catrionaforex
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@pip_train, thank you for your reply. What you say makes a lot of sense and definitely worth taking into account during price analysis.
Thank you :-)
UnknownUnicorn461520
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Hate to say I told ya so...7300 has arrived.
stackstrader
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@pip_train, What books and references can i find to understand exactly what you have learnt that you have explained here on the comments.
Just that one book you already mentioned out of 15K worth of books was the best?
Regards.
UnknownUnicorn461520
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@stackstrader, Haven't really found any books that clearly explain how progression works in charts. Most books tend to explain support/resistance has being static levels. The author of the book I mentioned above vaguely realized that S/R is actually not static, but I don't think he realized how to find those levels. What you've probably noticed is that your FIBS work some of the time, and then they get ran over like this OP's chart. Books explain trends, but don't actually explain how time frames work together. Multi-Time Frame analyst understand that times work together, but they don't seem to explain how and why. I've read most of the Harmonic Trading books. At best it's a new shiny trading style, that can offer success if used properly I guess. Any method can work if has an edge built in, and you can consistently exploit that edge. Wykoff methods are probably the closest thing to what I do, but it's not exactly right either. Essentially, I've learned different concepts from different styles of trading, which have been combined to explain the process of how and why price moves...and really, I only learned this because I had mentors before me, and it's not something that I have completely mastered yet either. I'm not hating on any method or style, I just see the holes in most of them.
The box in blue is essentially the spot you are expecting a significant reversal, based on harmonic fib patterns. I believe you will be correct in that we might get some liquidity there, I do not expect a trend change until the down leg start is tested.
Once I've identified the proper leg being retraced, I can then find it's high. From there, I can identify the move up that created the high, and find the swing points that are untested, by shifting to a smaller time frame.
The last level of support that was lost, and untested, becomes the leg start of the leg down. Price always moves from leg start to leg start. There is no reason to get short until a level of support is lost, and generally, until a leg start is tested, price maintains it's trend up to it. If you have any questions let me know for further understanding.