Hidden resistance and MIA

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    False Breaks on DB formation, Elliott, Fib Fans and MIA

    Just looking at this chart and thought it an ok example to use.

    Granted not the cleanest of formations but would have certainly suckered many newbie TA gurus into trade.

    First up if we take a look at the fall from March and we have a fairly clear inverted five wave impulse taking shape. The formation isn't great but good enough to see we have more downside to come. Currently the chart appears to be on wave four which would give maximum upside range at 94.

    Move on to fans if we draw the first fan from 159 on the 4/3 (being the last maximum high point of that peak) down to the current low of 75 on the 22/7. We now get a very clear resistance range which at the time MIA closed above 86 to confirm the DB the primary resistance line of the March fan sat just above the break level at 86. After the confirmed DB MIA started to run as unaware buyers were attracted to the DB formation. Price action first met primary resistance at 93 on the 27/8 and closed short of that level.

    As we now have a new short term high we then draw an additional fan from 22/7 low to our new high of 93. Notice how the days range the next day was within our new fan, and new fan resistance came through at 88.7. The close was well below new resistance but above secondary on our new fan and still above the break line of the DB formation.

    Today our main resistance line was again met at 89 and still held.

    Now if we look at our main fan we see the last resistance level coming down at a fairly fast rate, and if we revert back to Elliott this tells us to be aware of 95 resistance. If we look forward we see the final fan line running down to meet the 95 level late in September, reinforcing the Elliott theory.

    MIA was never a buy on the DB conformation and if the chart can push through the primary resistance level from March it may gather enough momentum to test the final resistance range at 95 late September. This is however a risky trade and warrants an extremely tight stop.

    That conlcudes this years lesson, for a more advanced analysis send money to my wife (saves the middle man)

    Cheers
    Sean
 
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