Lesson: How to Use Cycle Price Targets There are two main ways to use cycle price targets: 1. When a cycle target is reached, look for a trend reversal; and 2. When a cycle target is generated, consider adding to your position and plan a possible trade exit point. We will use the Ethereum weekly chart below to explain the uses of cycle price targets. The bluish band represents the so-called forward line of demarcation (FLD) for the 40-week (40W) cycle. Read more about the FLD construction in Lesson Price Projection Method 2. The green rectangles represent 40W upside cycle targets, the red rectangle is the 40W downside cycle target, and the gray rectangle is the 40W downside cycle target that is not fully reached/satisfied. Trend Reversals When the Price Reaches the Target § The price usually reverses/retraces when a target is achieved. § This is generally true for all cycles but especially for the longer ones, and especially when the target is the last one in a particular direction. From the 40W cycle targets below, we can see how ETH was making major reversals. § Each time a major cycle target is satisfied, the price reverses and starts an opposite trend. § Cycle price targets are fully satisfied about 70% of the time, generally, but this could vary for different cycle lengths and instruments. § Cycle price targets are almost reached with a higher probability, say 80-90%. § In uptrends, the upside targets are reached with a probability >70% and downside targets with a probability § Thus, allow that some cycle targets might not be fully reached or that they will be exceeded, in order not to miss a trend reversal. § When the price is in the general cycle target area, I pay attention and look at other indicators, such as: 1. Time cycles peaks/troughs turning points; 2. Elliott Wave analysis, and 3. Various technical indicators. § If they all suggest a possible price reversal, I start accumulating a position for the new trend. § Then I watch the price interaction evolution with FLDs multiple cycles from shorter to longer ones. What To Do When a Cycle Price Target is Confirmed/Generated § The typical approach is to follow cycle targets from shorter to longer cycles. § For example, if a cycle target for the 10-day cycle is generated, one can mark the target area for the 10-day cycle and examine it versus the FLD for the 20-day cycle. § The objective is to check whether a 20D cycle target will be generated by the price crossing its FLD if the 10-day cycle is reached. § One can continue the same process with the next longer cycle, etc. § The goal is to gain maximum visibility regarding the maximum target and to hold a position until that target is approached. § This approach is beneficial with options also. One can set the exercise price at a level below the available target to ensure that the option is in the money if the price approaches the target within some range. § If the price cannot break through the FLD, and the shorter cycles generate targets in the opposite direction, one should consider exiting the position, subject to other methods above agreeing. § Long story short, cycle price targets using FLDs are powerful, especially in combination with other methods above. Note: I explained in a recent ES Cycle Targets Parts 1-3 how to use evolution of price targets to get an estimate how much a trend can extend
