Every trader that uses the Elliott Wave theory as part of their trading analysis knows that the strongest and longest of an impulse wave pattern is the wave three. On October 8, we advised that the AUDUSD pair was forming this impulse wave pattern.
The chart below was posted, showing that we were calling for the impulse move higher and advising that the wave two (red) was terminated. As well, we advised that the pair was getting ready to rally higher for the wave three (red) to complete the higher degree move of the wave (C) (blue).
The invalidation level was set at the start of the proposed impulse wave sequence. Only a break below the wave (B) (blue) would cancel the impulse move higher. Traders could have placed tighter stops below the wave two (red) low, for if the price broke below this level, it would show that the pair would not have enough momentum to rally higher.
AUDUSD 45 Minute Midday Update Chart For October 8, 2020
On October 8, I posted "2 buy entry setups for the wave three rally higher." The first AUDUSD buy entry (below) shows the price was respecting the support/resistance zone (brown), and candlestick formations were producing shadows/wicks in this zone, thus signalling that buyers were trying to push the pair higher.
The trade was entered on the first signs of rejection of the zone, and the stop loss was set at the proposed wave two (red) low of the Elliott Wave structure.
AUDUSD One-Hour Chart For October 8, 2020
The AUDUSD second buy entry (below) shows that the price moved higher from the support/resistance zone (brown) and formed a bullish ascending triangle breakout pattern (orange). The buy entry was triggered when the price broke above the triangle pattern, with the stop loss at the black wave ((ii)) low of the proposed Elliott Wave structure.
AUDUSD One-Hour Chart For October 8, 2020
In the chart below, AUDUSD eventually rallied higher and hit the 1:2 RR buy targets on both entries. The pair had strong momentum to the upside, and we expect the price to continue hitting more targets above.
The Elliott Wave bullish impulse wave sequence is not complete and the recent wave three (red) move higher has not shown completion, so we can still assume the market is currently on the wave three rally. Expect higher prices in the coming trading days.
AUDUSD One-Hour Chart For October 9, 2020
Like any strategy, there will be times when the approach fails, so proper money/risk management should always be used on every trade.
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