Professor’s Comments January 19, 2016
Posted by OMS at January 19th, 2016
I had some time this morning to look at a few wave mapping possibilities for the next few weeks. And because the Dow appears to be getting very close to a minor wave 3 bottom which should make trading extremely volatile, I thought I’d share my thoughts on how I plan to trade these waves.
One of the things I have to consider after Friday’s plunge is that minor wave 3 down may not have completed. If this is the case, the Dow should have a small rally early in the week, maybe to the 16,150 level, before dropping to 15,800 to complete minor wave 3 down. This sets up the possibility of a short trade of about 350 Dow points.
In other words I’ll be looking to short the Dow from near or above the 16,150 level down to 15, 800.
If this trade works out, I’ll exit the short near 15,800 and look for the minor wave 4 up rally to begin that should take the Dow back to the 16,400+ level. This rally should last into early February. Then once wave 4 up completes, the Dow should resume its re-test of last summer’s lows.
Again, this trade assumes that wave 3 down has not completed.
IF I’m wrong and minor wave 3 down did complete on Friday at the 15,842 level, then the risk to the trade is about 250 Dow points if it is established near or above 16,150. I’ll take that risk. That’s because even if the Dow continues to move higher, it means that minor wave 4 is underway and I don’t expect it to get much higher than 16,400.
And if the Dow gets anywhere near 16,400, I will start positioning myself for the major wave 5 decline. A minor wave 5 short has a possibility of over 1,000 Dow points.
Bottom Line: If the Dow rallies early next week, I will be looking to establish short positions anywhere near or above 16,150+.
That’s what I’m doing,
h
Not sure of the terminology we use? Check out these articles
The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ
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Category: Professor's Comments