US30 - DAX 30 is on verge of Completion of Elliot wave pattern @ 9465 - 9500

Elliott Wave Theory was developed by R.N. Elliott and popularized by Robert Prechter. This theory asserts that crowd behavior ebbs and flows in clear trends. Based on this ebb and flow, Elliott identified a certain structure to price movements in the financial markets. The article serves as a basic introduction to Elliott Wave Theory. A basic 5-wave impulse sequence and 3-wave corrective sequence are explained. While Elliott Wave Theory gets much more complicated than this 5-3 combination, this article will only focus on the very basics.

There are two types of waves: impulse and corrective. Impulse waves move in the direction of the larger degree wave. When the larger degree wave is up, advancing waves are impulsive and declining waves are corrective. When the larger degree wave is down, impulse waves are down and corrective waves are up. Impulse waves, also called motive waves, move with the bigger trend or larger degree wave. Corrective waves move against the larger degree wave.

From the above chart US 30 has started its upside rally from the level of 7660$ and tested the level of 8460$ which was the starting of the Wave Theory and it was the I Wave. There after minor correction was seen from 8460$ to 8090$ in the form of wave II  which was just near to 50% retracement of wave I, there after it enter in wave III. Looking at the wave III it tested the higher level of 8770$ and it has retraced by 85% of wave I from the bottom of wave II, and exactly tested the higher level of 8770$ and started its correction in the form of wave IV. Wave IV retrace by 35% of wave I and tested the level of 8490 which was top of wave I and failed to trade below the same and reverted and confirming the wave V start. Currently it is in the continuation of the wave V and is near to the top level. If we calculate 121.8% retracement of wave I which is 800 points will bring the level of 9465 which is the expected top and reversal is expected from the higher level. On higher side 9500 will be the second resistance as its 161.8% expansion of wave A-B of the Symmetrical triangle. DE30 is nearing the strong resistance around 9465 to 9500 and we might look at sharp correction in DE30 soon, which might enter in corrective wave in form of a-b-c pattern.  On lower side support is seen at 9250 level and sustain trading below the same on weekly closing will confirm the down trend and any rise near the range of 9460 will be a good selling opportunity where advisable  stop to be placed at 9600 and wait for downtrend to continue. 

EURUSD Wedge pattern formation if 1.3700 holds then target 1.3000 - 1.3100

Implication: A Continuation Wedge (Bearish) is considered a bearish signal, indicating that the current downtrend may continue.

Description: A Continuation Wedge (Bearish) consists of two converging trend lines. The trend lines are slanted upward. Unlike the Triangles where the apex is pointed to the right, the apex of this pattern is slanted upwards at an angle. This is because prices edge steadily higher in a converging pattern i.e. there are higher highs and higher lows. A bearish signal occurs when prices break below the lower trendline.

Over the weeks or months that this pattern forms the trend appears upwards but the long-term range is still downward.

Trading Considerations

Pattern Duration: Consider the duration of the pattern and its relationship to your trading time horizons. The duration of the pattern is considered to be an indicator of the duration of the influence of this pattern. The longer the pattern the longer it will take for the price to move to the Target. The shorter the pattern the sooner the price move. If you are considering a short-term trading opportunity, look for a pattern with a short duration. If you are considering a longer-term trading opportunity, look for a pattern with a longer duration.

Target Price: The target price provides an important indication about the potential price move that this pattern indicates. Consider whether the target price for this pattern is sufficient to provide adequate returns after your costs (such as commissions) have been taken into account. A good rule of thumb is that the target price must indicate a potential return of greater than 5% before a pattern should be considered useful. However you must consider the current price and the volume of shares you intend to trade. Also, check that the target price has not already been achieved.

Criteria that Supports

Volume:  Volume should diminish as the pattern forms.

Criteria that Refutes:

Moving Average: The penetration of the 200-day Moving Average by the price is a false bull signal.

Rising or Stable Volume: Volume should diminish as the pattern forms. If volume remains the same or increases this signal is less reliable.

Underlying Behavior: In this pattern prices edge steadily higher in a converging pattern i.e. there are higher highs and higher lows indicating that bulls are winning over bears. However, at the breakout point the bears emerge the victors and the price descends.

EURUSD has given a confirm reversal from the higher level of 1.3620 and if today’s closing is seen below 1.3600 will strongly give the confirmation of the down side move where 1.3530 will be the immediate target which is the rising trend line. Short term support is expected to hold the level of 1.3530 and further sustain trading below 1.3530 will give a confirmation of down trend to continue. Height of the Pole is 530 pips (1.3830 – 1.3300 = 530) and if we take 50% as first target of the pole (530 * 50% = 265 pips) from the breakdown @ 1.3530 comes to 1.3265 level and second target comes to the level of 1.0300 (1.3530 – 530 pips = 1.3000 level). To be safer side we will expect target of 1.3100 level from the current level and on higher side weekly closing must not trade above 1.3650 level and as a stop if hold one can maintain short for the given target.