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In summer 2004 I tried to specify the shape of the forming horizontal correction and forecast further movement of EURJPY (see Possible 2000-pip Trade).
In autumn 2006 the projected target was reached, having confirmed that the calculations were correct. Research of the skewed triangles (see Skewed Triangles in the FOREX Market) was based on the analysis of the extended horizontal correction, formed in 2003-2005.
At the same time price, having reached the specified target, kept moving upwards, increasing wave degrees inclusion and conquering new highs. Unfortunately, wave theory does not give a unique answer about the maximum limit of such a powerful movement, though it allows us to specify possible boundaries of the final stop. And I will try to do it in this article.
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Figure 1. Wave counting on the monthly chart. Alternate variant.
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According to one of possible scenarios upward movement is presented in the shape of the impulse, and its final wave (5) seems to be almost completed with the inner waves. If the supposition is correct then with the help of the Methods of prices movement projection the nearest area of its possible ending may be specified.
As the result of simple calculations (shown on the chart) we get the estimated range between 161.45-163.71 for this time-frame (red-yellow ellipse). As you can see, in these calculations only waves of the Intermediate degree took part. Current maximum price value (162.39) is already in the mid of this range, supposing that uptrend will complete soon.
Let's consider the wave structure of the final impulse on smaller time-frames.
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Figure 2. Wave counting on the weekly chart. Alternate variant.
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One of possible variants of wave counting allows me to treat impulse (5) as absolutely completed. Though its ending is a bit clumsy.
The estimated range from the previous chart (red-yellow ellipse) is shown on this chart. At the same time the four waves of the Minor degree allow us to use them in the specifying calculations too (given on the chart). As you can see, they almost fit the frames of the previous range, having raised the upper edge only by 1 point. This is an additional confirmation of the earlier calculations.
Let's consider the details of the wave counting of the final impulse (5) in Figures 3 and 4.
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Figure 3. Wave counting on the daily chart. Alternate variant.
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In Figure 3 quite possible wave counting is given on the daily chart. Though I still think that impulse (5) ending is a bit clumsy. The thing is that in the classical impulse with extension in the third wave its first and fifth waves tend to be equal both by the length and extension. Here the extension of wedge 1 of (5) is four times more than the extension of supposed impulse 5 of (5). Moreover, there is some irregularity in the wedge.
Let's see the final wave 5 of (5) on a smaller time-frame (Figure 4 below).
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Figure 4. Wave counting on the 240 min chart. Alternate variant.
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The structure, shown in the picture, seems to be incomplete. One of possible variants of its wave counting marking supposes that we are only in its third wave [iii] of 5. In this case we can hardly expect that the impulse will complete in the projected area or near it as the price is in the mid of the projection already and upward waves (v) of [iii] and [v] of 5 have not started yet. Though this variant is possible.
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Figure 5. Wave counting on the 240 min chart. The main variant.
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The variant when I mark the forming impulse as wave 3 of (5) seems to be more logic. In this case we are only in its wave (iii) of [v] of 3 and currently some horizontal extended correction iv of (iii) is forming. It is not clear yet what shape it will assume, it may be either a running or skewed triangle or even a triple three.
The only thing is clear — with such a variant of wave counting the area of projected values should be looked for on higher degrees.
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Figure 6. Wave counting on the daily chart. The main variant.
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In case of a new wave counting marking the reference points change and the whole impulse (5) logically seems to be incomplete. The first and the fifth waves ([i] of 3 and [v] of 3) become more proportional. Using the waves of the Minute and Minor degrees as reference points the area of projected values for possible ending of wave 3 of (5) may be specified, this wave will be between 165.12 and 168.25.
It is too early to speak about wave 5 of (5) projection at this wave degree as only the first two reference waves of the Minor degree are completed.
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Figure 7. Wave counting on the weekly chart. The main variant.
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With the help of the height of the skewed triangle we get an approximate mark of possible ending of wave (5) on the weekly chart — figure 174 (see article Skewed Triangles in the Forex Market). Taking into account the fact that wave 3 of (5) is incomplete, it does not seem so unreachable.
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Figure 8. Wave counting on the monthly chart. The main variant.
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With the help of the monthly time-frame and wave of the Intermediate degree we can find the area of new boundaries for possible ending of wave (5). This is a range between 170.70-177.08 (red-yellow ellipse in Figures 7 and 8). It is at the upper edge of the channel of the global impulse, which indirectly confirms that the calculations are correct.
Thus, scenarios of possible nearest price movement and marks for its further rise (165..168 and 171..177) are specified. Though EURJPY will make the final choice.
Addition (June 14, 2007)
The pair is moving in accordance with the forecast, several variants of the adjusted marking are given here.
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Figure 9. Wave counting on 480 min chart.
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Supposedly wave iv of (iii) has assumed the shape of the modest zigzag whereas corrective wave structures which were assigned to it (see Figure 5) turned out to be contracting diagonal triangle v of (iii) which completes impulse (iii) of [v] of 3. Having broken slightly the upper forming line of the diagonal triangle the price fell confirming this pattern by implication.
Currently corrective wave (iv) of [v] of 3 is forming. It has already fulfilled the minimum requirements for the fourth waves of the impulse:
- it has reached the area of the previous fourth wave of a lower wave degree iv of (iii),
- it reached the lower edge of the trend channel,
- the depth of the retracement reached 24.6%,
- MACD 5-34-5 oscillator is in the negative area.
That is why it is possible that it has completed already. Though the wave structure of wave (iv) of [v] of 3 supposes its further development (may be in the shape of zigzag a-b-c), the beginning of the diagonal triangle may be reached. Projected targets for the final wave (v) of [v] of 3 should be adjusted only once the fourth wave (iv) is completed. If we suppose that this four (iv) has completed then new projections are in the already calculated value area.
Supplement (June 16, 2007)
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Figure 10. Wave counting on 480 min chart.
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Supposedly, wave (v) of [v] of 3 is almost completed. Yesterday the price reached the area of projected values calculated more then a month and a half ago.
Supplement (June 25, 2007)
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The price has reached the projected area and the upper edge of the channel, the trend downward reverse is highly probable.
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Forming of the supposed fourth wave 4 may last for more than a week.
Note
Given possible trading plans are purely informational purpose only and they should not be considered as trading guides or an invitation to make a transaction.
Reference:
Dmitry Voznuy
forDmitry@yahoo.com
April 26, 2007
Do not reproduce without explicit permission of Alpari.
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