This is Why Cocoa's Crash Was a Perfect Setup - FINANCIAL-24
This is Why Cocoa's Crash Was a Perfect Setup
Perfect from an Elliott wave perspective, that is
By Elliott Wave International
The other day, I went paddle-boarding for the first time and was struck by a familiar feeling; one that comes from, of all things, speculating in the markets.See, when your board is in line with the current and the wind is at your back, the board moves effortlessly, gliding along the top of the water with no strain at all. This is the equivalent of trading with a market's trend.
On the other hand, when your board goes against the current and the wind comes at you from the front, any attempt to move forward feels like wading through wet cement. This is what it's like to enter a market during a countertrend move.
It goes without saying, we're all aiming for the first scenario. The question is, how do you know which move prices are about to make?
In 2013, our chief commodity analyst Jeffrey Kennedy co-authored an invaluable resource titled "Visual Guide to Elliott Wave Trading" in which he explained how combining Elliott analysis with technical methods enables traders to identify price action moving with, and against the larger trend. In the book, Jeffrey writes:
"Odds favor traders who are long in bull markets (and short in bear markets) versus short sellers in bull markets (and buyers in bear markets). Overall trading in the direction of the trend is the path of least resistance.
"The four best waves to trade are therefore: Wave 3, 5, A, and C because they are oriented in the direction of the one larger trend."
"Remember, five-wave moves determine the direction of the larger trend, while three wave moves offer traders an opportunity to join the trend. So in Figure 1.7, waves (2), (4), (5), and (B) are actually set-ups for high-confidence trades exploiting waves (3), (5), (A), and (C)."
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