The ABC sell set up I posted on Monday was triggered by this morning’s weak close.
I’ve outlined one approach to trading strategy on the chart below. This involves:
- Entry at the close of yesterday’s candle ( about 1.0185)
- Initial stop above Friday’s peak (about 1.0278)
- Scope to move the stop down behind new failure points in the trend being followed
- An initial profit target based on a Fibonacci projection cluster (about .9995)
The profit target uses the following Fib projections for the final swing down from “c”.
It projects that the swing down will be:
- The same size as the first swing from “0” to “1” (100% measure shown on the chart) and
- 127% of the length of the correction from “3” back to “c”. This is known as an “external retracement” or “expansion” projection
If this all pans out then the point labelled “c” on the chart will prove to be the end of swing “4” in a 5 swing decline. The move down to the profit target will be the 5th and final swing of a 5 swing decline.