SLV - An Exemplary Trade Setup
§ With the following chart, I want to illustrate one of the most powerful EWT-based trades.
§ We do not know for sure whether the last low was the ultimate low or lower lows to come.
§ We know the following: 1) Cycles are pointing up; 2) There was a positive RSI divergence at the low, and 3) SLV made seemingly five waves up -> After a pullback in three waves, there should be at least another move up in five waves.
§ Thus, we expect SLV to move higher.
§ There are two alternatives: A) Black a-b-c, and B) Green i-ii-iii.
§ Let us assume that SLV pulls back to the cycle target, which aligns with the typical pullback move to the 61.8% Fibonacci retracement; these two together represent a high-probability pullback target, so let’s assume one buys SLV in the target area.
§ Consider case A): There is about $2 at risk to the Stop, and about $4 of potential profit; thus, reward/risk is 2:1.
§ Consider case B): There is at least about $6 of potential profit, but could also be $7 or $9, depending on whether wave iii will reach 138.2%, 161.8% or 200% Fibonacci expansion level; Thus, the reward/risk is between 3:1 and 4.5:1.
§ One does not need to be an expert in Elliott wave counting; It is sufficient to recognize these a-b or i-ii setups for profitable trading.
§ This works at all time scales and is applicable to scalping, swing trading, and investing, depending on the size of the pattern.
