RTY - a bullish fractal that got invalidated
Let’s come back to a daily chart and our bullish long-term count. The top made in Sep’2018 was a wave ( 3 ) up. And the following sharp decline that bottomed in Dec’2018 was a corrective wave ( 4 ) down. That major low made in Dec’18 is our main reference point.
RTY - Daily Chart - updated on 8-13-2019
Off the low made in Dec’2018 we were supposed to get an impulsive rally in wave ( A ) of ( 5 ) that was had to retest the top made by wave ( 3 ) up back in Sep’2018.
RTY made a top of wave ( 3 ) up at 1,764.30 on Sep 04, 2018.
That impulsive wave ( A ) of ( 5 ) had to be structured as five waves up
On the chart below we can see that RTY rallied into the top made at 1,612.50 on February 25, 2019.
That was just a bit higher than 66.7% retracement of wave ( 4 ) down (the decline started off Dep’2018 and bottomed in Dec’2018 ). We should count that Feb’18 top as wave 3 of ( A ) of ( 5 ). Off that February top we had to get a corrective wave 4 down.
As you can see on the chart, I can only count that February top as wave 3 up
Off the Feb top RTY was supposed to play a corrective wave 4 down:
RTY - 240 min chart updated at 3-50 AM on 8-13-2019
As you can see on the chart below, RTY played out a huge ave 4 down, a corrective A-B-C down that finally bottomed at 1,458 on June 3, 2019.
It stopped just slightly higher than its critical support ( 1,453 ).
Off the June’2019 low RTY was supposed to play another rally in wave A of 5 that would target the top made in Feb’19.
And RTY nicely delivered that rally. Price topped at 1,603.50 on July 31.
It came very close to the top made by wave 3 up in Feb 2019.
By that point RTY moved very nicely along the textbook Five Wave fractal in wave ( A ) of ( 5 ), a rally started in Dec’2018.
To complete that rally it needed to give us a corrective decline in wave B of 5 followed by another final push higher in wave C of 5.
B of 5 had to stay over the low made by wave 4 down in June 2019 and wave C of 5 was supposed to make a new higher high for 2019 year over the top made in Feb’2019.
This count got damaged when RTY dropped under its critical support on August 6.
This is completely not allowed for wave B of 5 to break support at the low made by the previous corrective wave 4 down.
The reason why that is so important rule is that the Five Wave fractal is a backbone of any trending move. Any trending move is a sequence of higher highs and higher low. If a corrective wave breaks under the low made by previous corrective wave of the same degree that violates the very foundational principle of the Five Wave up fractal!
So the bullish count is damaged.
Sometimes analysts disregard such momentarily spikes under meaningful support if they happen after hours and those lose are never retested during regular trading hours.
But other indices NQ and ES did not violate their critical support levels.
I do not have a good high confidence count for RTY at this moment. I will be watching for better clues and will not trade this index and any derivatives like IWM or TNA until I better understand what kind of a fractal is in play.
RTY - 240 min chart updated at 3-50 AM on 8-13-2019
Previous Updates:
Important Disclaimer
CastAway Trader LLC, the publisher of this web-site and videos is not registered as an investment adviser nor a broker/dealer with either the U. S. Securities & Exchange Commission or any state securities regulatory authority. Users of the website www.castawaytrader.com and viewers of the videos are advised that all information presented on the website is solely for informational purposes, is not intended to be used as a personalized investment recommendation, and is not attuned to any specific portfolio or to any user’s particular investment needs or objectives.
Trading stocks, options, or futures carries a high level of risk, and may not be suitable for all investors. Before deciding to trade, you should carefully consider your objectives, financial situation, needs and level of experience. CastAway Trader LLC provides general overview of trading methods that does not take into account your objectives, financial situation or needs. The content of this website must not be construed as personal advice. All trading setups and/or trades presented in the web site and/or trading chat room by CastAway Trader an/or by other members of the chat should be considered hypothetical for educational purposes only and should not be expected to be replicated in a live trading account.
An investor could potentially lose all or more than the initial investment. You should not speculate with capital that you cannot afford to lose. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style.
You should be aware of all the risks associated with trading. You should seek advice from an independent financial advisor.
Any information posted on this web site is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All users of the website must determine for themselves what specific investments to make or not make and are urged to consult with their own independent financial advisors with respect to any investment decision. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. All opinions, analyses and information posted on the website are based on sources believed to be reliable and written in good faith, but should be independently verified, and no representation or warranty of any kind, express or implied, is made, including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, CastAwayTrader LLC and its officers and employees undertake no responsibility to notify such opinions, analyses or information or to keep such opinions, analyses or information current. Also be aware that the owners, officers and employees of the web site www.castawaytrader.com may have long or short positions in securities that may be discussed on the website, Premium Trading Chat room and/or in the videos posted by CastAway Trader LLC.
Past results are not indicative of future profits.