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EWZ - Brazil - this is why I am bearish

EWZ is the largest country ETF focusing on Brazil economy. That is a great case explaining idea of invalidation of an impulsive count Focus on the blue labels. EWZ used to follow an impulsive count, it was supposed to play the five wave up fractal It played a very nice rally in wave A of 3 up and then a move down got stronger than it was allowed by teh Five Wave up fractal. The great thing about the Five Wave u fractal is that corrective waves inside that fractal should make higher lows. That is why subwave B down could not break under the low of wave 2 down. In June 2018 and then later in Sep 2018 EWZ broke under that critical low. That was the death of the Five Wave up fractal. Now I keep telling you that invalidation of the count does not mean immediate breakdown. Its like a chicken with recently cut head. It can run around for some time pretending its still alive. Look at the rally that followed the double breakdown. It was a super strong rally that took 10 months, from Sep 18 to Jul 19. But there are two important things you should note about that rally.

EWZ - Daily chart updated on 11-19-2019

Let’s zoom-in to see micro structure of that rally. First, it failed to make a new higher high in comparison to the top made in January 2018. Second, the structure is not impulsive. It is structured as a-b-c up, then a-b-c down and another impulsive move up. Those are reasons why I am bearish on Brazil. I think we are watching starting micro waves of a large wave C down ( see the red labels on the first chart) that can push price down under 30.

EWZ - Daily "zoom-in" chart updated on 11-19-2019

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