In all probabilty, yesterday’s high at 1.3539 marked the end of a complex correction for the EUR/USD and so we are potentially in the middle of the first leg of a new short-term downtrend. In case you had sold around 1.3535, I urge you to place a stop loss at your break-even level and forget that you had that position till we reach at least 1.3250 area. For those who cannot bear to wait, you can either take back some of it at 1.3395, or better still at 1.3370/75. Ideally, one should not be trading that core position, rather new trades should be dealt as stand alone trades.
Coming back to where we are currently, around 1.3450, as you can see in the Elliott Wave analysis on the chart, the Euro is probably going to trace a mini complex 4th wave (the 2nd wave was a simple correction and as corrections tend to alternate between simple and complex, this one is going to test our patience). It might just be better for you to do some early sping cleaning of your desk rather than trade the Eur here. There is also a chance that we go back all the way to 1.3530 before a collapse because the last upmove was an extended 5th, and frequently, an extended fifth wave experiences a double retracement. THis means we have seen part of the first retracement, and after a nearly 100% correction, we will get the second retracement. There is no guaratnee that this will happen, but if we trade above 1.3467, then we should not ignore that possibility. Only don’t get thrown off your trade at 1.3535 if this happens.
I have received a few emails expressing astonishment at how the Euro turned at levels we anticipated a few days back. While thanking those who sent goodwill messages, I’d like to point out that Elliott Wave analysis is a powerful tool at the hands of the trader. There are times when it works like magic, and there are times when it SEEMINGLY doesn’t work. When it doesn’t work, it is actually working! because it is telling you where you need to place your next step in a moving floor. That is how one is supposed to use elliott wave principle – not as a forecasting tool, but as a trader’s tool. Good luck to all of you, and spread the word around.