In this technical blog we’re going to take a quick look at the Elliott Wave charts of Dow Futures (YM_F) published in members area of the website. As our members knew, we’ve been favoring the long side in YM_F due to it having an incomplete bullish sequence against 3.23.2022 low. Moreover, Indices like FTSE are also showing an incomplete bullish sequence which favors more upside in the Indices. Dow Futures found a peak at January 5, 2022 (36832) and started pulling back and this pull back took the form of double three Elliott wave correction and members knew it was nothing more than another buying opportunity. In the remainder of the article, we are going to explain the Elliott Wave Pattern and talk about the strategy of blue box buying.
Before we take a look at the real market example, let’s explain Double Three Elliott Wave Structure.
Double Three Elliott Wave Structure is one of the corrective patterns in Elliott Wave theory. Double three is a sideways combination of two corrective patterns. There are several corrective patterns including zigzag, flat, triangle etc. When two of these corrective patterns are combined together, we get a double three. Wave W and Y subdivision can be zigzag, flat and double three of smaller degree or triple three of smaller degree. Wave X can be any corrective structure and double three is a 7 swing structure.
Chart below shows Dow Futures in a double three Elliott wave structure lower from January 5, 2022 peak and has reached the blue box which is made up of 100 – 161.8% Fibonacci extension area. Clients knew a 7 swing correction should end in this blue box and we should see a turn higher to resume the rally for a new high above January, 2021 peak or for 3 waves reaction higher at least.
We don’t like selling the pair against the main bullish trend. Strategy is favoring longs as price already reached the blue box because we still expect at least 1 more leg higher. Once bounce reaches 50 Fibs against black ((X)) high, we will make long position risk free by either moving stop loss to entry position or taking partial profits and putting stop on remaining position below the low within the blue box. Invalidation for the trade would be break of 1.618 Fibonacci extension level at 27807. As our members know, blue Boxes are no enemy areas , giving us around 80% or a higher chance to get 3 waves bounce at least from the blue box.
Chart below shows Dow Futures (YM_F) has found buyers at the Blue Box area and we are getting good reaction from there. Pull back completed at 30585 as a double three Elliott wave structure. The rally from the blue box reached and exceeded 50% of the decline from black ((X)) peak. Consequently, members who have taken the long trades at the blue box now enjoying profits in a risk free trades. Now we would need to see break of January 5, 2022 peak in order to confirm next leg up is in progress. Until January 5, 2022 high doesn’t break, a larger double correction lower still can’t be ruled out in which case we would highlight the next blue box buying area for members.
Keep in mind that market is dynamic and presented view could have changed in the mean time. You can check most recent charts in the membership area of the site.