GBPUSD – The Next Breakout`s Direction

This week the pound unfolded towards the downside reaching and exceeding the first specified target before continuing to move in a sideways manner.

The past week was mainly characterized by indecision with cable locked in a sideways movement, this week`s main count expects cable to breakout towards the upside while the alternate count expects that breakout to unfold towards the downside, we added tight, short term confirmation points for both counts to provide us with an early indication of the direction of the next breakout.

As always we will be using each count`s invalidation point to determine the highly probable count.

8-Hours Main Count

– Invalidation Point: 1.6616
– Confirmation Point: 1.6770 — 1.6823
– Upwards Targets: 1.643
– Wave number: 3 purple
– Wave structure: Motive
– Wave pattern: Impulse

8-Hours Alternate Count

– Invalidation Point: 1.6823
– Confirmation Point: 1.6616 — 1.6583
– Downwards Targets: 1.6530 — 1.6382
– Wave number: iii orange
– Wave structure: Motive
– Wave pattern: Impulse

Elliott Wave chart analysis for the GBPUSD for 28th February, 2014. Please click on the charts below to enlarge.

Main Wave Count

01-gbpusd28feb14daily1

01-gbpusd28feb14daily1macd

This count expects that wave B maroon is unfolding as a triangle labeled waves (A) through (E) black with waves (A) and (B) black complete and wave (C) black is unfolding towards the upside.

Wave (C) black is unfolding towards the upside as a zigzag labeled waves A, B and C blue with waves A and B blue complete and wave C blue is underway.

Wave C blue is unfolding as an impulse labeled waves i through v pink with waves i through iv pink complete and wave v pink is unfolding towards the upside.

Wave iii pink unfolded as an impulse labeled waves (i) through (v) green.

Wave (iv) green unfolded as a zigzag labeled waves a, b and c orange.

Following the completion of wave iii pink, wave iv pink unfolded as a zigzag labeled waves (a), (b) and (c) green with wave (c) green unfolding as an impulse labeled waves i through v orange.

Wave v pink is unfolding towards the upside likely as an ending diagonal with waves (i) and (ii) green complete and wave (iii) green is unfolding towards the upside.

Wave (i) green unfolded as a zigzag labeled waves a, b and c orange.

Wave (ii) green unfolded as a double zigzag labeled waves w, x and y orange.

Within wave (iii) green wave a orange is underway with waves 1 and 2 purple complete and wave 3 purple is unfolding towards the upside.

As far as MACD study goes, the recent price high failed to register a new high on MACD suggesting that the recent upwards movement is not accompanied with enough momentum and thus creating a divergence which is typical of a fifth wave.

This count would be initially confirmed by movement above 1.6770 and the final confirmation point is at 1.6823.

At 1.6843 wave 3 purple will reach 1.618 the length of wave 1 purple.

This count would be invalidated by movement below 1.6616 as within wave 3 purple no second wave may retrace more than 100 % the length of the first wave.

Alternate Wave Count

02-gbpusd28feb14daily1alt

This count expects that wave (C) black is likely complete and that wave (D) black is starting to unfold towards the downside.

Within wave (C) black wave C blue unfolded as an impulse labeled waves i through v pink.

Wave v pink unfolded as an impulse labeled waves (i) through (v) green.

Within wave (D) black, waves i and ii orange are likely complete and wave iii orange is starting to unfold towards the downside.

Wave i orange unfolded as a leading diagonal labeled waves 1 through 5 purple.

Wave ii orange unfolded as a double zigzag labeled waves W, X and Y purple.

This count would be initially confirmed by movement below 1.6616 and the final confirmation point is at 1.6583.

At 1.6530 wave iii orange will reach equality with wave i orange and at 1.6382 wave iii orange will reach 1.618 the length of wave i orange.

This count would be invalidated by movement above 1.6823 as wave ii orange may not retrace more than 100 % the length of wave i orange and it should be noted that the invalidation point will be moved to the end of wave ii orange once we have confirmation that wave iii orange is unfolding towards the downside.

3 thoughts on “GBPUSD – The Next Breakout`s Direction”

  1. Waqas Sarfraz

    Dear Nady ,

    I have couple of question….

    1)In a expanded flat how much the wave-B can retrace ??? Is 138% the max. or can retrace more than that as well , if more than how much more max. is possible ???

    2)In a expanded flat how much the wave- C can go ??? Is 161.8% the max. or it can go more than that as well , if more than how much more max. is possible ???

    thanks ,

    1. Dear Waqas,

      Before answering your questions there are two points that I think are worth mentioning. The first point is that Fibonacci levels are guidelines not rules so for example wave B might end at a level between 1.236 and 1.382, failing to reach 1.382 or exceeding it does not render a count invalid.
      The second point is that, the higher the time frame, the stronger Fibonacci levels become. For example, 0.618 retracement is respected and stronger on a daily chart than it is on a 15 minutes chart, that of course due to the volatility of the Forex market and as well leverage can be a culprit.

      With that being said, the common retacement level for wave B in an expanded flat correction is at 1.236 or 1.382 the length of wave A and rarely 1.618, honestly I am yet to see a B wave that retraced more than these levels and of course you could use the subdivisions within wave B to anticipate its termination (i.e.: within wave B, wave C tends towards equality with wave A).

      Regarding your second question, there are three ways to calculate a target for the completion of wave C in an expanded flat correction:

      (i) The most common ratio is 1.618 of wave A.
      (ii) Wave C terminates beyond the end of wave A by 0.618 the length of wave A.
      (iii) Within wave C a fifth wave tends towards equality with a first wave.

      Applying these three techniques would provide you with an accurate level to anticipate the completion of wave C in an expanded flat.

      Let me know if further clarification is needed :).

      Sincerely,
      Nady Laymoud

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