Wednesday, May 19, 2010

Euro - 5 waves down followed by 5 waves up

 Yesterdays post warned that 5 waves down on the hourly charts was nearly complete and that we would likely be heading for a rally to at least correct the impulse wave down occuring since 1.304. The post proved timely as within the hour the EUR/USD began rallying. The post also mentioned the fiurst significant support at the area surrounding 1.2425.

The rally appears to have completed or nearly completed 5 small degree waves up, and has stalled near 1.2425. This indicates that the trend at some degree has changed. To what degree is unknown. I have placed both options for counts on today's chart, but we will have to wait and see. Until then, I will keep laser focused on the short term charts for hints either way. Until then, we are in for a correction of the EUR/USD rally likely to fib areas which also fall in the price area of the rallies 4th wave. For those of you who are new to Elliott wave analysis, this is a common retracement area for 2nd waves, so I will be watching this area for support. If I was still short, this would be a respectible area for me to exit my shorts and either wait for more clues or go long for the next wave up (whether it is a c wave or 3 wave doesnt matter to us very short term traders).

My gut and the fact that the latest low was not accompanied by a decent RSI divergence has me leaning toward the ABC option for this rally (more downside to come before a more significant rally), but I will let the market show me the way.

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