[torero]

Originally Posted by waveslider »

When you start looking for these, they appear all over. ER2 just completed one, check it out....

Line 1-4 is the target line

Ok, I see it. In classical TS, this is a rising wedge which usually means a quick bearish drop is imminent (if you draw the line from point 2 through point 4 along with 1 through 3, you'll see the wedge). This wedge has a target of going back to point 2. This is all in Edwards and Magee's book, very well explained.

[waveslider]

Torero, you are correct about the rising wedge. Wolfe goes deeper than the wedge though. What happens is that the rising wedge is rejected and the market creates a target for itself when the geometry gets skewed.

I am not the best instructor, but there is info out there on this pattern. If you are a visually oriented trader, this is a very valuable pattern to know.
Guarantee you the professionals see this, it is a contrarian pattern so creates a quick and powerful move.

The trick is to be able to see it developing as it happens.

Here is another guy who sees it and understands. Bill Wolfe doesn't use fibs, and I don't think you need to either.
http://blog.fxinstructor.com/august-...-room-summary/

Go to Bill Wolfe's site to learn the pattern, if you google you will find it.

If YM holds this morning's lows (and the 1-3 line), then this pattern is set to run. The target is a good 800 points higher. Closing above today's open would be a good first confirmation, above Friday's high would be another.

The weekly ER2 chart I posted shows the power of this pattern as it is completed! Target hit perfectly. In consolidation patterns you start seeing these all over the place...

[bronxterp]

Originally Posted by torero »

Ok, I see it. In classical TS, this is a rising wedge which usually means a quick bearish drop is imminent (if you draw the line from point 2 through point 4 along with 1 through 3, you'll see the wedge). This wedge has a target of going back to point 2. This is all in Edwards and Magee's book, very well explained.

And if you want to sprinkle in some Elliott Wave into this...

the rising wedge will only appear at the end of the 5th wave. If you're in the 5th wave and you start seeing overlapping subwaves, this is where doing the Wolfe projections can really pay off. These subwaves will only be 3 wave patterns...thus all the overlapping. Like you said, the drop that occurs after a rising wedge can be very sharp and quick.

[torero]

That's great! Now we have 3 theories that confirm this pattern, that means it's bound to have high probability of working!

[waveslider]

It really only works in a consolidation phase of the market. I believe point one is supposed to be the first pivot in the range, then point 2 is an attempt at a new high/low, which would fail (confirming range), then point 3 is a low below point 1 which also fails....

Basically it is a pattern whipsawing a lot of people, the more the better.

When there is momentum in a market, like there is here, the range is broken and price inverts into a larger wave rather than staying in a range.

[waveslider]

Here's another one that just played out on YM. Point 1 took place at 8:05 PST. The fake-out and entry was at 10:16 PST.
Approx. 30pt return.

[waveslider]

Here's another one that I was watching in the RUT. Pretty shallow but effective.

There are some important rules for this trade, but if they are satisfied the % profitable is very good. Best used in a non trending market.

#5 was the fakeout/failure

Connecting a line between #1 and #4 gave the target

[BlowFish]

If my understanding is correct point 5 can be outside the 1-3 line (even preferable). If that is the case do you wait for some trigger (reversal bar or something) to confirm point 5 and enter?

Cheers.