So, what can we see here?
The price is making an apparently “abcde” pattern above the previous ATH . At the moment, we observe “abcd.” “e” is remaining, and it would be great to observe it so we can say with certainty, “The pattern is finished.”
Let’s assume that we have the finished pattern. What can we expect from here?
Using Fibo extensions, we can project two targets. Those would be the levels we will be interested in. As a general rule, we use the first fibo extension as a break-even level. And the 2nd one as a final target.
Hey, but you have the daily structure in the middle of all this!
Yes, that is absolutely true. You should be careful with that level; if you decide to trade, it would be smart to mitigate risk or be 100% risk-free. Remember that this is a statistical discipline; there is an X % of the price breaking the level and a Y % of the price bouncing there. NOBODY knows which of them will happen. However, that doesn’t mean that we can not develop a setup in a situation where we have a good risk-reward ratio that is worth taking the uncertainty with perfect risk management (like 1 to 2%) of the trading capital.
Tell me about your activation and invalidation levels
Yes sir. The green horizontal line represents our activation level IF the pattern is completed (take that in mind). And below the “abcde” structure, we will define our invalidation level either to cancel the setup or to set the stop loss. Final Target 2nd level of the fibo extension.
With all this clear, we hope this can be useful. Remember: Always make your own math, and protect your money! Thanks.