Jeff asked me how I obtain my support and resistance levels. It's actually pretty old-school stuff.
Of cause the structure is important, so is previous tops and bottoms and the of cause you need to calculate the Fibonacci correction targets. I always calculate the 38.2%; 50% and the 61.8% correction of a wave. As you can see below I have a system doing the calculations for me, but it's easy to doing them by a spread sheet, if you don't have a system that can make them for you.
So let's take a look a the decline from 131.41 down to 126.11, because that was a full five wave decline on the 15 min. chart.
On the first chart above I have no counts on it, but from 131.41 down to 129.39 was wave i, so i calculated the Fibonacci targets for this move, please see the chart above. and as you can see the 61.8% correction target came in at 130.64 and at the same time we had a bottom and a top at this level too, which made this an important short term resistance. You can my text from June 6 above, where I said, that this rally was likely to meet resistance at 130.31, that I would likely to protect the upside, but even a break higher to 130.65 would not invalidate my bearish call. As you can see the resistance at 130.65 pretty much did the job as the high came in at 130.73, but that was above 130.65 you might say? Yes, but we never made a close above 130.65 on the 15 min. chart and therefore the bearish call was still valid.
Okay the same chart as above, but now I have label the waves we now have wave i and ii in place and is looking for wave iii down. I always expect wave iii to extend no matte, what time frame I'm looking at. So on June 6 I said we could possibly even see a decline down to 127.19 (1.618 times wave i), but that was calculated from 130.31. Now we saw a move up to 130.73 and the same distance (1.618 times wave i) down from 130.73 would give us a target at 129.46 and we saw a bottom at 129.44 and that is how I would find the next support.
Moving on we can now calculate the correction targets five wave decline from 131.41 down to 126.11 and as you can see at the above chart, I now calculate the Fibonacci targets for the entire decline to get the possible resistance levels. We already know, that the top of wave iv of one lessor degree is a natural attraction levels, and here it falls together with the 50% Fibonacci resistance level, so we should not expect much more correction from here. I would guess that we will see a limited and very short lived spike just above 129.18, before wave 5 lower takes over. A break below 128.17 will confirm the top and that wave 5 lower has begun.
On the above chart I have labeled the wave 4 correction and we should expect wave 5 to start any time now and the target for wave will be? I calculate the 38.2%, the 50% and the 61.8 from the top of wave 1 to the bottom of wave 3 and subtract it from the top of wave 4, which gives me the following targets: 127,17 (38.2%); 126.54 (50%) and 125.91 (61.8%) and as both 127.17 and 126.54 is above the low at 126.11 I would expect wave v to end near 125.91 and that would make wave c of the first A-B-C correction from 133.81. Is anything supporting that 125.91 could make a strong support area? You bet - Just take a look below.
Now here is something that could be mind blowing. If we do find support near 125.91 and sees a 61.8% correction of the decline from 133.81 down to 125.91 we will see a top near 130.79 like in a S/H/S top and if the next decline break below the neck-line at 125.91 the target will be 118.01 and remember that the 38.2% correction target of the entire rally from 94.10 to 133.81 comes in at 118.60 and the the bottom of wave 4 of one lessor degree comes in at 118.73. This is all speculation at this point, but it would fit the Picture nicely right?
EWS-
ReplyDeleteThanks for taking the time to share- Appreciate the time you took to put this together.