Get started

Wolfe Wave

Decoding Wedge PatternsThere is a strong bias about chart patterns and their interpretation in the technical analysis space. It is a very common belief that a rising wedge forms bearish sentiment and a falling wedge forms bullish sentiment. Is that really true and how much we can rely on such bias? In order to understand this, we need to dig a little bit about how such concepts could have come into the picture. The best I could get on the internet is an article from Investopedia that explains few technical reasons and constraints of using these patterns. Through the Lens of Diagonal Waves But, when I was studying the concepts of waves, this is what I found from one of the sources I referred to about diagonal waves: ewtaf.com Details are summarised and explained in the below diagram The summary here is, Diagonal waves of contracting types are the same as that of Contracting Wedge patterns. And the diagonal waves of Expanding types represent expanding wedge chart patterns. Diagonal Waves can appear as sub-waves in multiple parts of the entire Elliott Wave. And here are our scenarios Leading Diagonals Leading diagonals are diagonal waves that can appear towards the start of a trend. This can be Wave 1 of an Impulse Wave - This is the start of a new trend. Avoid trading these wedges as they can be short pullbacks. Or better look for pullback and trading opportunities in the direction of the wedge. Wave A of a Zigzag Wave - This can lead to a possible bull trap or bear trap. The corrective wave is likely to continue after a small pullback Ending Diagonals Both expanding and contracting types can be ending diagonals. Can appear as Wave 5 of an Impulse Wave - Meaning the trend is coming towards possible exhaustion. Wave C of zigzag or flat - Correction or pullback is coming to an end and the trend is likely to continue Wolfe Wave Wolfe wave is a rule built on top of wedge patterns to identify time-bound targets. The idea of generating targets and stops based on the Wolfe Wave is as shown below:  Further, here are a few indicators developed in Pinescript that can help do them automatically. Wolfe Scanner Wolfe Strategy Takeaways Here are a few things we learnt from our study. When you are looking for wedge patterns on the chart, look for wedge formations created by 5 pivots. You can learn more about this from this post Fitting Patterns To Your Bias? Before trading a wedge pattern, try to identify if the pattern fits in a bigger scheme of things. Check if they are towards the end/start of a trend or pullback Concepts such as Wolfe Wave can help setup rules for trading wedge patterns for pullbacks.
Education
by Trendoscope
9
Its More Straight-Forward Than You ThinkThis is an Update to my previous SPY idea - same target/time to target, just more simplified. After the last 2 weeks there is a lot of bearish sentiment but its really just finding support at wave 4 of a leading diagonal. The initial target is 408 in the next week or 2, and then goal target is 425-432 by late March-Early April. The symmetry in the waves indicates this is a leading diagonal (or bearish wolfe wave that is about to complete the final wave). Either way its still bullish near-term. After 425-432 there will be significant downside risk, but for now expect a nice rally through March. We are in the bounce zone, there is still risk to 388-391 early this week, but if any of the following occur we won't see the 388-391: - retest and hold 393 - close above 397.92 - Intraday breach of 401.42 (above 401.42 it will turn into explosive upside)
AMEX:SPYLong
by JerryManders
11
dji updateOn February 7, traders focused on Fed Chair Powell’s comments on the monetary policy at The Economic Club of Washington. Powell noted that the disinflationary process had begun, but there was a long way to go before Fed’s inflation target would be reached. Importantly, Powell stated that Fed would not change its 2% inflation target, which remained the global standard. According to Powell, the road to the 2% inflation will be bumpy. The recent job market data was much stronger than expected, and the Fed must continue to raise rates to reach a sufficiently restrictive level. Powell also noted that he expected significant progress in the fight against inflation. Speaking about the potential for a rate cut in 2023, Powell said that Fed’s decisions would depend on economic data. The Fed continues to reduce the size of the balance sheet and has no target for this reduction. As in the case of interest rates, the decision to stop the reduction of the size of Fed’s balance sheet would be data-dependent. previous analysis :
TVC:DJI
by MtICHI