Deep Wave (b) in Wave (iii) in EURUSD Daily Chart

Deep Wave (b) in Wave (iii) in EURUSD Daily Chart

I have provided several examples of how accurate the modified structure can be within the short time frames. Moving up the scale to daily charts (Figure 4.22), the degree of variance in projections certainly becomes larger in point terms (Table 4.18).

Figure 4.22 Potential Development of a Daily Triangle in EURUSD Including a Deep Wave (b) of Wave (iii)

Table 4.18 Wave Relationships for the Potential Development of a Daily Triangle Shown in Figure 4.22

Very clearly some of the ratios implied are rather unusual but closely related to Fibonacci or harmonic ratios as an extension to prior waves. What it does highlight is that while the ratios are all valid, forecasting can end up being very trying.

Such events can end up being a 20/20 hindsight forecast, and certainly I found the sequence in Wave (C) one of the most difficult. Strangely enough, I did forecast the 1.5143 high, my target being 1.5146, but by using a different structure in the move higher. Thus, once the decline developed I had been looking for a much shallower correction, specifically at 1.4207 and 1.4048. Indeed, there were reactions from 1.4217 and 1.4028 respectively, but by this time the momentum conditions were still quite bearish and did not indicate any potential for a reversal, and price actually penetrated the anticipated support levels forcing a change in outlook.

There are always multiple potential projections in most areas of the wave structure, and while tying together projections from different wave degrees, both higher and lower, can generate high confidence areas of wave terminations, use of other complementary techniques can help to fine-tune or even identify when a target is not going to hold.

I should stress that even if there are times when price conditions are clouded and uncertain, the eventual end of a move that is finally realized after the event does constitute valuable information since it actually provides clarification of the wave structure of one higher degree. From that point it provides guidance for the expectations of the subsequent wave development.

In Chapter 5, I will cover this subject and provide some tips on how to approach forecasting and recognizing when anticipated structures begin to break down, and general signals that can forewarn you of confirmation or denial of structures.