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Jeff -
I'm sending a second chart on MU to explain how I would trade the current
situation.
First a few standard rules I go by in determining Waves 3, 4 & 5.
1) Wave 3 - A wave will not be labeled a Wave 3 unless the Elliott Oscillator
breaks comfortably above (up moves) or below (down moves) the Breakout band,
a GET proprietary indicator, which is the black line on my Oscillator on the
bottom of the chart. The Oscillator will run to it's highest point in a Wave
3.
2) Wave 4 - 94% of all wave 4's that have ended in a wave 5 making a new high
or low had the Elliott Oscillator pull back to at least 90% from the wave 3
peak. It is just as important that the Oscillator does not pull back more
than 40% of the Wave 3 Oscillator peak on the other side of the zero line
(140% from the high) or the probability of new highs or lows diminish.
3) Wave 5 - If all the prior conditions are met then look for Wave 5 to make
a new high or low. The strength of the Elliott Oscillator will not be as
strong in this final move therefore giving you a clear divergence from the
Wave 3 Oscillator highs or lows. This is where I look for an end to the 5
wave sequence up or down.
The above represents how I try to take some of the complication out of the
Elliott Wave theory. I can just look at the Oscillator and have a good idea
what wave we may be in. Which leads me to MU!
I look at (3) Elliott Oscillators, 5/17 (short term), 5/35 (Original) &
10/70 (Commercial), to see who's in control. Since both the short term &
original Oscillators have gone past 140% of the Oscillator high in Wave 3
(see original chart with 5/35 Oscillator) and the price has not broken below
the Blue, Green & Red wave 4 channels, another Get proprietary indicator, I
default to the 10/70 Commercial/Longterm Oscillator.
On the chart you can see that the 10/70 Oscillator is closing in on a 90%
pull back. When this happens I throw up (2) indicators, the Regression Trend
Channels & the 6/4 MA lines which are the 6 period MA of the highs displaced
4 periods and the 6 period MA of the lows displaced 4 periods. I will use
either one of these 2 indicators to get me into a trade depending on the
situation. In this case I would buy MU 1 tick above the high of the first
bar that CLOSES outside the blue MA line.
This is why I chose the MA lines over the Regression Trend Channels with
regard to MU. Many Waves are single sloped and others multi sloped. If you
notice on my chart Wave 2 looks to be a single sloped line which is confirmed
by the Pearson's R reading of 0.979. The Wave 4 we are currently in seems to
be multi sloped with a clear ABC pattern evolving. Notice here that the
Pearson's R reading is down to 0.705 due to the multi slope nature of the
wave. The Regression Trend Channels got you in a lot earlier in the
transition from Wave 2 to wave 3 because it had a high Pearson's R reading
combined with a single slope wave. It put you in at about 40 compared to 46
1/4 with the MA's. Since the Pearson's R reading for the current Wave 4 is
low @ 0.705 and it appears multi sloped I would tend to use the MA lines as
an entry trigger rather than the RTC.
This way I let the market tell ME what wave we are in. The price may
close outside the MA line or it may not. If it closes outside the MA line it
may take out the high of that bar or it may not. Once your in the trade use
stops that make you feel the most comfortable.
Hope this helps - Lenny
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