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Summary

  • Long term outlook: Up
  • Medium Term Outlook: Down
  • Short Term Outlook: Sideways to Down
  • Medium Term Revision Point: Break above 1.6038
  • Potential Medium Term Target: 1.2347 and below
  • Preferred Short Term Strategy: Situation is not very clear. Look only for small short trades during the few days ahead of an expected range bound market.

With a possible wave 4.III.5 at the February 17, ’10 high (1.3596), we may have had a completed wave 5.III.5 at the February 19, ’10 low (1.3444). If this scenario is correct, then we are now in wave IV.5. Considering the shape of wave II, we are likely to see wave IV.5 in the shape of a Flat, a triangle or a complex correction. The main image presents a rough depiction of this possible scenario.

On the other hand, considering that since the February 5, ’10 low (1.3586) all the subsequent move apparently seem to be in three waves each, without apparently forming a triangle, we can be faced with a plethora of potential scenarios that we can hold as viable options at the given time. The best thing to do at such instances is to stand aside and let the market rule out some of those scenarios so that the probability of success of a potential setup is elevated. One of the many possible scenarios at the current juncture is given in the second image. As per this outlook, we have a completed wave 4.III.5 at the February 9’10 high (1.3839), followed by wave i.5.III.5 at February 12, ’10 low (1.3530), ii.5.III.5 at February 17, ’10 high (1.3585), followed by iii.5.III.5 at February 12, ’10 low (1.3530). If this is correct, then we may be forming an expanding diagonal in wave 5.III.5. As a general rule for expanding diagonals fourth waves are longer than second waves and fifth waves are longer than third waves. This information can be useful in setting the targets for any trades that one my wish to consider, while the market stays within this formation.

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