FX TECHNICAL ANALYSIS
The value of the Elliott Wave Theory comes from its ability to distinguish between trendy price action and countertrend price action. Trendy moves are obviously the moves you want to participate in. They are strong directional moves that waste little time in moving higher or lower without hesitation. Or as Jesse Livermore might say, trendy moves identify the path of least resistance. Countertrend moves are the ones that move against the trend. They are frequently wrought with indecision and tend to move more sideways than up or down. The thing about countertrend moves that tend to catch most people off guard is that they almost always end with a strong move that could be confused for the start of a new trend. There’s some serious market psychology that I could inject here about why this is. But the bottom line is that this type of strong “ending move” is exactly what a trend needs to resume. The strong ending move gets enough market players leaning in the wrong direction, providing enough fuel for the market to finally complete the countertrend move and take off in the right direction. This is very pertinent right now because strength in 2017 fits the bill as the ending movements of large countertrend price patterns that will soon give way to the
18 FX TRADER MAGAZINE October - December 2017
The USD long-term uptrend will resume
true trend. This reversal should provide some incredible trading opportunities, ones that you can get in on at the ground floor.
This discussion is best had while analyzing current price action on several currencies. We will do this below by looking at some of the major currency Exchange Traded Funds (ETFs). Additionally, what this article is not is an Elliott Wave tutorial. It’s easy enough to get ahold of one if you want one – I have a great one on my website. But for the sake of getting to what’s important in regard to the current currency market outlook, it’s important to understand the two main rules that make up the basis for Elliott Wave. One, trends play out in five moves (and will be labeled 1 through 5 on the charts below). Two, countertrend moves play
out in three moves (and will
be labeled with A, B, and C on the charts below). I could write a novel about why trends are “fivers” and countertrend moves are “threes”, and aſter using this method to consistently beat the market for the past 15 years, I assure you it works. But again, you’re not here for the tutorial or to watch me pat myself on the back; instead, we’ll stay focused on what Elliott has to say about the current outlook for currencies. Let’s get to work.
U.S. Dollar (ETF: UUP)
Remember back at the start of 2017 when the U.S. Dollar was testing long-term highs and trying to break out? That seems like a long time ago now that the dollar has reversed firmly lower and is now as low as it’s been since the end of 2014. To
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