About this blog:

CURRENT MARKET TREND: Up 5/27/16 @ 2090
Stop-loss 2026

Friday, December 2, 2011

Cable - Time to Face My Fear

Cable has a tendency to kick my ass for some reason. I recently went long and was stopped out for a $4K loss only to see it rally a couple hundred pips after I was stopped out. That couple hundred pips would've yielded over $10K. Grrrrr. I've known for awhile not to gamble too much on Cable because it's in a long-term correction. Corrections are probably the hardest patterns to trade because the patterns are always morphing, especially when you're talking about a correction the dates back to 2009. I have been tracking this corrective pattern since early in 2010, and the long term count is still valid. I'll start with the weekly chart so you can see what I've been tracking.

As you can see from the chart, 2009 marked a wave 3 low in Cable and we've been experiencing a corrective wave 4 since. The EW Osc is displaying lower highs and higher lows validating the triangle count. The C wave of the triangle is a double zigzag corrective pattern, a more complex pattern which usually develops in the C or D wave of a corrective triangle. The major ABCD waves thus far break down into 3-3-3-3 structures. If it looks like a triangle, and acts like a triangle....well if it was anything other than Cable I'd say it's a triangle. Damn Cable.

Next we'll zoom in to the daily chart:

This chart shows the D wave low in October followed by the a of E rally. I have the b of E low in place with a 1 of c of E up and finishing off 2 of c of E. From here we could go long with a stop under the D wave low, but that leaves us with a 320 pip stop-loss. Most people don't want to take a 320 pip drawdown before a move up, and nothing is guaranteed. I'll zoom in again and try to get us a better entry.

Finally we'll zoom in to the hourly chart:

Oh Cable, why do you hate me so?? Was this an Expanding Diagonal Triangle for wave 1 of c of E off the b of E wave low. Maybe, and I'm going to play it like it was. The Fibonacci Support Zone lies at 1.55600 where c of 2 of c of E resides. So I have now dropped my stop-loss to 290 pips rather than 320 pips. Not much I know, but it's something. Next support comes in around 1.55300 where prior 4th wave meets with C=1.618*A. Both are good setups. The latter setup will reduce your exposure to -290 pips. These stop-losses are all based off the D wave low, not the b of E wave low. You can further reduce your losses by setting stops at that low and risking 100 pips. There is still a great risk of being wrong, but the fib support zone should at least provide a bounce so we can get out of the trade if it doesn't look like it's going to play nicely.

So, if this trade doesn't work I WILL NEVER PLAY CABLE AGAIN!

To be a successful trader I believe you have to start in the forest and finish at the limb. Starting with a weekly chart and zooming in multiple levels will let you see aspects you may be missing while focusing on minute levels. Always remember there is something bigger.

I hope this helps.


Jim Genosky


Post a Comment