Σάββατο, 30 Ιουλίου 2016

SILVER -XAG: Weekend Metals Report from ElliottWaveTrader

Author: Garrett
Anatomy of a swing trade
XAG, silver, 4to12HourChart


I thought it would be fun to detail how to put together a swing trade for silver using Fibonacci pinball. Metals have been the gift that keeps on giving this year, and once again we have another great long setup developing in silver.

Since the low that was struck at the beginning of June, we have seen price action that is very consistent with the third wave of an impulse. Counting the June low as the bottom of wave (2), we can see textbook pinball playing out so far with wave 1 of (3) coming to the .382 extension and wave 3 of (3) reaching the 1.00 extension.
Following the July high as wave 3 of (3) we have been attempting to identify the completion of wave 4 of (3), always a challenging task. The most probable options at this time are that wave 4 of (3) completed at the July 20th low, or that price will continue to extend sideways in a wave 4 triangle shown in red.
Either way this sideways consolidation has allowed technicals to reset and is forming a clear bull flag. This type of continuation pattern is a great trade setup because often there is clearly defined reward versus risk based on Fibonacci pinball.
In this case, we have notable support between the .618 extension at 18.79 and a major pivot level that has played out since the 2011 high at 18.50. Therefore, we can place our stop just below this support, for which I am choosing 18.25.
Based on Fibonacci pinball, our minimum target for wave 5 of (3) should be the 1.382 extension at 23.21. From the current price that is a RvR of a little bit better than 1:1. Not as attractive as we want, so if you were entering right here, you would likely set the stop higher (below the July 20th low), or plan to fill out the trade if price drops lower (entering only a partial position here).
Based on past experience with silver though, it is not unreasonable to consider a 5th wave extension for 5 of (3). That would likely take price to the next fib at 1.618, or even as high as the 2.00 extension at 27.55. These targets offer much more favorable RvR for the swing trade, allowing us to use the 18.25 stop. Therefore, our 3 levels to take profit on the position would be 23.21, 24.75, and 27.38, trailing a stop once price breaks out above the July high.
Targets for re-entering the trade on wave (4) will be dependent on where wave (3) completes, but even at this stage we can make an educated guess thanks to Fibonacci pinball. If we extend to at least the 1.618 fib, then wave (4) can bottom as high as the 1.236 at 22.29. Otherwise, or next entry levels would be 20.87 and 19.60, once again using 18.25 as a stop.
Once again, based on past experience with silver, it is not unreasonable to consider a 5th wave extension for wave (5). There is also the larger .382 extension of cycle degree wave I at 36, which is another reason to expect an extension. Therefore the ideal levels to take profit from the wave (4) entry would be 27.55, 30.57, and 36.
Undoubtedly there will need to be some adjustments made to the plan based on how the count plays out going forward, but putting together a plan like this helps take a lot of emotion out of the trade. Hopefully this helps illustrate how to use Fibonacci pinball to put together a trading plan, and encourages some members to consider a swing approach to trading the metals instead of worrying about micro counts :).

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