Home > Short-Term Trader > Market Getting Gutted…Fourth-Wave-Triangle Triggered

Market Getting Gutted…Fourth-Wave-Triangle Triggered

Sunday evening I highlighted two technical patterns taking shape in the S&P futures-Inverted-head-and-shoulders and a Fourth-wave-triangle. In either event, one or the other was set to trigger by no later than Monday's close. As it turns out, the underside trend-line of the triangle was taken out late Monday afternoon sending prices lower into the close. I must admit I thought the Inverted H&S pattern would triumph but neverless, in the spirit of flexibility, I honored the break in the triangle.

At the time of writing this, we are currently trading at 1047, below Friday's low of 1051.25, and overnight traded down to the bottom of the target zone with the ES touching 1036.75 . A measured move as a result of this triangle trigger, was calculated using its 40+ handle range of the wedge (42.75 to be exact), which made the target down around 1045. The next level of significance comes in at the February low of 1036. Again, the overnight low was 1036.75.

  4th wave

As mentioned before "4th wave triangles" are the end game to a trend and with a multitude of breadth extremes currently in place I look for this move lower to be the last before a sustainable recovery takes place.

Yesterday, I posted a note regarding Friday's gap reversal day. Jason Goepfert from sentimentrader.com discovered a very high percentage scenario which corroborates my analysis. This is what he had to say in regards to making a trade off Friday's reversal relative to similar historical instances. "The worst part of the trade tended to be the first day after the reversal, which was up only 46% of the time.  If you bought that down day and held for three days, you would have had 7 winners out of 7 trades, with an average return of +4.5%." For details on this study click here

The"4th wave triangle" trade has concluded on this end. I will be patient and take day-trades until I see something I can sink my teeth into.

It's amazing how fast things are progressing these days! This is a trader's market and as such we must be ready to make moves at an instant and be prepared for anything. Each day I put together a game plan which consist of key scenarios as well as alternate scenarios. This provides the confidence of preparedness as well as keeping flexibility at the forefront of my mind at all times. Hope these insights are helpful as we navigate these interesting times.

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Categories: Short-Term Trader
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