Cable unfolded towards the downside as expected with a gap and we will discuss the implication of such a gap from an Elliott Wave perspective at the end of today`s analysis.
Cable is yet to reach the main hourly count`s target. It is worth noting that the main count`s hourly target for today does not provide us with a practical trading opportunity; specially since the main count expects that Cable is close to a reversal point.
We are updating the main count according to the latest price action and as well adding an alternate count which expects Cable to unfold upwards.
P.S.: It is worth noting that both main and alternate hourly counts are presented on 2-hours chart for clarification purposes.
Main Hourly Count
– Invalidation Points: 1.5753 — 1.5375
– Confirmation Point: 1.5657
– Downwards Target: 1.5650
– Wave number: iv pink
– Wave structure: Corrective
– Wave pattern: Zigzag
Alternate Hourly Count
– Invalidation Points: 1.5657 — 1.5932
– Confirmation Point: 1.5753
– Upwards Targets: 1.5802 — 1.5824
– Wave number: c orange
– Wave structure: Motive
– Wave pattern: Impulse / Ending diagonal
Elliott Wave chart analysis for the GBPUSD for 26th June, 2015. Please click on the charts below to enlarge.
Main Daily Wave Count
This count expects that primary wave B maroon is complete and that primary wave C maroon is unfolding towards the downside.
Within wave C maroon intermediate wave (1) black is complete as an impulse labeled minor waves 1 through 5 blue and intermediate wave (2) black is unfolding towards the upside.
wave 2 blue unfolded as a zigzag structure labeled minute waves a, b and c pink.
Wave 3 blue unfolded as an impulse labeled minute waves i through v pink.
Wave 4 blue unfolded as a triangle labeled minute waves a through e pink.
This count expects that within intermediate wave (2) black, waves A and B blue are complete and wave C blue is underway.
Wave B blue unfolded as a double zigzag labeled waves w, x and y pink.
Within wave C blue it is expected that waves i through iii pink are complete and wave iv pink is underway. After the completion of wave iv pink, Cable is expected to unfold towards the upside to complete wave v pink and therefore wave C blue and ultimately wave (2) black.
As far as MACD study goes, recent upwards movement failed to register higher highs on MACD, that behavior is expected from a C wave and even though a bearish divergence is clear on the daily chart, it is less likely that it is complete. For the time being, this bearish divergence is considered “in progress” and we should expect another bearish divergence between the ends of waves iii and v pink.
It would be confirmed that wave v pink is underway by movement above 1.5932.
At 1.5945 wave C blue will reach 0.618 of wave A blue and at 1.6193 wave (2) black will reach 0.618 of wave (1) black.
This count would be invalidated by movement below 1.5375 as wave iv pink may not enter the price territory of wave i pink. As well this count would be invalidated by movement above 1.7193 as wave (2) black might not retrace more than 100 % of wave (1) black.
Main Hourly Wave Count
This count expects that within wave C blue, it is expected that waves i through iii pink are complete and wave iv pink is unfolding towards the downside.
Wave i pink unfolded as an impulse labeled waves (i) through (v) green.
Wave iii pink unfolded as an impulse labeled waves (i) through (v) green.
Wave (i) green unfolded as an impulse labeled waves i through v orange.
Wave (iii) green unfolded as an impulse labeled waves i through v orange and wave iv orange unfolded as a triangle labeled waves A through E purple.
Wave (v) green unfolded as an impulse labeled waves i through v orange with wave iii orange unfolding as an impulse labeled waves 1 through 5 purple.
Within wave iv pink, it is expected that waves (a) and (b) green are complete and wave (c) green has more to offer towards the downside.
Wave (a) green unfolded as an impulse labeled waves i through v orange.
Wave (b) green unfolded as a triangle labeled waves a through e orange.
This count would be confirmed by movement below 1.5657.
At 1.5650 wave iv pink will reach 0.382 of wave iii pink.
This count would be invalidated by movement below 1.5375 as wave iv pink may not enter the price territory of wave i pink and as well this count would be invalidated by movement above 1.5753 as within wave (c) green no second wave may retrace more than 100 % of its first wave.
Alternate Hourly Wave Count
The difference between both main and alternate counts is within the subdivisions of wave iv pink. This count expects that wave iv pink is complete and that wave v pink is unfolding towards the upside.
This count expects that wave iv pink unfolded as a triple zigzag labeled waves (w), (x), (y), (x) and (z) green. Triple zigzags are very rare formations and this is why this count is considered an alternate count.
Within wave v pink, it is expected that waves i and ii orange are complete and that wave iii orange has started unfolding towards the upside.
As far as MACD study goes, today`s price action failed to make new highs; On the other hand, MACD readings registered higher highs and in the process creating a bearish divergence which is more inline with what the main hourly count expects.
This count`s confirmation point is at 1.5771.
At 1.5821 wave iii orange will reach equality with wave i orange and at 1.5885 wave iii orange will reach 1.618 of wave i orange.
This count would be invalidated by movement below 1.5667 as wave ii orange may not retrace more than 100 % of wave i orange. It should be noted that the invalidation point will be moved to the end of wave ii orange once we have confirmation on the hourly chart that wave iii orange is unfolding towards the upside.
Food For Through:
There are four common types of gaps:
1- Breakaway gap: occurs when price break away from an area of congestion. Usually, price do not fill that gap. which is not what happened with Cable today. Usually occurs in 3rd waves.
2- Common gap: tend to occur when trading is bound between support and resistance level on a short span of time and market price is moving sideways.
3- Exhaustion gap: signals the end of a move. These gaps are associated with a rapid, straight-line advance or decline. Usually occurs in C waves and 5th waves.
4- Measuring Gap: formed usually in the half way of a price move. Usually occurs in 3rd waves.
More often than not, gaps represents a complete five wave sequence, this means that a gap might represent wave C or wave 1. In case of “breakaway gap” or “measuring gap” this sequence might represent an extended third wave.
The main count expects that the first wave within wave (c) green might be complete. It is also possible that wave (c) green might be complete and therefore wave iv pink; this suggests that Cable is about to reverse directions and move upwards which is exactly what the alternate count expects. That is the only reason we did not include that possible count in today`s analysis even though it is technically valid, since it expects the same behavior from Cable as today`s hourly alternate count.