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Elliott Wave Analysis of AUDUSD

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Does this look familiar?

The insert has been taken from Frost & Prechters book

It appears the AUDUSD is setting up for a potential reversal as the recent price action is forming a potential wedge, which as the insert shows, should see a reversal to the upside

There is a risk point to the pattern as wave 5 of the ending diagonal can not be longer than wave 3, as the pattern is a contracting wedge, so the moves get smaller and the market is getting compressed and likely to break to the upside

Of course nothing is a guarantee in the market, but this is where knowing the risk control point can offer us a low risk trade

Posted Image

The risk point to the pattern is at 1.0132, thats the stop for the trade, if you look carefully you can see the positive divergence on the RSI, thats a good sign for the pattern and is confirming the loss of momentum

Posted Image

Now i want to show the range that this pair is trading, notice that this is coming into strong support at the 1.0200 area, this is simply in a 400 pip range, so if a stop is placed at 1.0131, the risk from here is around 70 pips at current levels.

If we can get a bit lower from Sunday, we could limit the risk even more, but i want to see this stay in the context of the wedge formation, NOT an impulsive breakdown, that is wrong for the pattern

Coming into a strong area of support offers us some more information that can help the setup and a potential buy side trade early next week

The target initially is around the 1.0400 area, but based on any upside move should help decide if a stronger upside move is possible

But i would be happy with risking 60 pips or so for 180-200 pips

Wouldn't you??

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Good luck!!!

PS- Do you notice how i am posting the setup BEFORE the move? I believe in full transparency, members see the bad trades as well as the good ones, most Elliott Wave services only show you the AFTER shots, so they are "selective" with the marketing of their services.

I don't think that is the right way, even if you are not a member but read my work, this way you can share the benefit's of my work, although i wont be updating this chart on the blog, you have a trade and you know the risk point

Only members will see the updates

You wont find many other services like us, open and transparent, warts and all, we trade the ideas we post in the forum, so we got "skin in the game"

I will very likely be trading this in my personal account as a swing trade, so members will be able to trade this along side with me
To be there for the good times, you got to be there all the time - Ben Lichtenstein

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