Using Fibonacci to Count Waves

2016년 1월 1일

AUDUSD, 1st January 2016

Over the past couple of months I've been teaching myself to count waves using Fibonacci & realizing the importance of this. (And some of my previously published counts, say a year or two ago, are really quite off in the detail if not also overall - hehe). Here goes.

Going up from the low, 17th December at 0.70957, there's a small wave i ...

the price then retraces just > 0.618 forming wave ii...

wave iii then extends up just > 1.382 as proportion of wave i, but < 1.618 wave i. Very typical length wave iii.

wave iv then retraces just > 0.5 wave iii but NOT > 0.618, a common length of wave iv. Additionally no overlap with wave i (red dotted line).

wave v extends up to a quite precise 1.618 of wave i. This is the extended wave, as often with comdoll x's.

This then all appears to form a complete wave, all in recognizable Fibonacci proportion, so I've labelled it (a).

What then appears to be a near picture perfect little wave (b) retraces ~ 0.236 wave (a), also a standard Fib retracement especially for wave (b) in a zigzag.

What appears to be wave (c) then continues upward to form an ending diagonal.

[if it is wave c, then there's a wee rule break - wave iii is the shortest (just), however I've seen this happen before, in the EURUSD back in June / July 2015 just gone.. a little questionable there because of a substantial gap.. but also in a wave c]

So, overlooking that small 'blip', it appears most sensibly interpreted as a completed zigzag, a-b-c, 5-3-5.

Additionally: wave (c) is 0.764 the length of wave (a), acceptable & shows relationship (wave c's in zigzags most commonly form 0.618 the length of wave a OR approx. equal length) BUT...

… perhaps the most telling Fibonacci length there is this wave, in the right position to be an e (circled) is 0.618 (shown dark red / maroon) of what appears to be wave c, circled... the top of which is just over on the left up at just above the 0.5 retracement of the preceding wave iii... & this 0.618 relationship is most common of wave e's to c's in a contracting triangle.

And this coupled with the ending diagonal suggests on balance this may well be the end of the wave four to now drop into a wave 5 taking out the low at 0.69073 back in early September... if successful a trade of about 350 pips.

... finally, on the daily chart a long legged / dragonfly doji formed into last trading day close - suggesting hesitation if not outright rejection of the 0.73360 price zone – a long term significant level.

Even if this count proves incorrect (there are always reasons, say this could be wave an of a larger e – that's my second option, hence pencilled in as e) it does appear to be part of, if not the completion of something approaching a barrier triangle with the 0.738-ish level as the upper bound.

(This is a viewpoint based on a technique at this point in time, it may prove incorrect... Please bear in mind probability is not the same as possibility and manage risk accordingly)

PS My apologies if the letters come out so small - when I construct the chart they are of a perfectly viewable size.