Friday is known for being a slow day in the capital markets. Day trading volume is good until the close of the European Stock Markets; thereafter the markets are either quiet or choppy, and in the lower time frames price turns sideways. This is an ideal opportunity to prepare for the next trading week, evaluate results of the previous week, and adjust the Elliott Wave counts.
The price action on the EUR/USD this week gave us some profitable trades during the uptrend. Our Elliott Wave study highlights the waves “(wxy)” in black and “(WXY)” red in circle; this is a complex structure where it is necessary to trade with caution, and apply a strategy to be able to respond quickly to any failure in the structure, and protect the capital. This bullish trend shows a loss of interest, with momentum waning, which means we are close to the end of the cycle.
On the daily chart we continue studying Fibonacci relationships between waves “w” and “y” of the two degrees mentioned above. The proposed target area is between 1.3845 (161.8 %) and 1.3882 (100 %). One of the ways to reduce and manage risk is to adopt a conservative trading style and this means going for closer targets as long as they meet appropriate risk/reward ratios.
On the hourly chart we see that the price is close to finishing the move up, but still has room to move higher until the target area is met. The diagonal impulse shown in the chart with waves “i, ii, iii, iv, v” labeled in black, is responsible for completing the structure; the active wave is “iii” and it’s target will be a few pips above 1.3834, then the wave “iv” will be activated with a sideways structure, and finally the wave “v” will end the structure.
As can be seen both on the daily chart and the one hour chart, price shows being close to ending the cycle, so bullish day trading should be undertaken with caution, and especially with precision. Swing trades need to wait until we see a safe level for a market reversal. Remember that Elliott Wave analysis should not be used as a trigger by itself; rather, the trigger must be the result of a complete trading plan covering the particular trigger rules, trade management and objective analysis . Happy weekend!