SPY Intraday Elliott Fractal Opportunities

Aug 24, 2009: 6:11 PM CST

Today served as a great lesson of the “Elliott’s Fractals” trade concepts I frequently mention here on the blog.

The main idea is to recognize a new momentum and price high (impulse) for a potential 3rd wave, and then wait for a pullback into support.  Buy into the support and play for a possible 5th wave that should end in a momentum divergence.

Please refer to the free “Best Trades to Take Using Elliott Wave” page in the Education section.

For now, let’s see two back-to-back “Elliott’s Fractals” and the trading opportunities we could have taken from them today.

Without going into intricate detail (I explain these trades and more, as well as how to recognize structure in tonight’s “Idealized Trade” summary report), I did want to highlight two specific opportunities using each 5-wave progression.

Again, after a new price and momentum high (such as that which occurred in the morning’s gap), we want to be buyers of the first pullback to play for a retest of the recent high (for a minimum target) and a higher price high as a maximum target.

There was a 3-bar pullback which was probably too fast to capture in real-time unless you had very quick reflexes.  Then price formed its new high… but this time it did so on a negative momentum divergence and a flat-line TICK divergence, which served as ‘non-confirmations’ of the price high and that odds favored a reversal.

This allowed you to put on an aggressive short-sale at the highs due to the divergences and play for a maximum of a price reversal.

The BETTER example comes later as a 5-wave progression gave clean signals and cleaner entries.

For example, the 3rd wave that ended just after 1:00 EST formed a new (intraday) price and momentum low, so it was advised to wait to short-sell the first pullback into resistance – likely the 20 EMA.

A shooting star (bearish) candle confirmed this entry, with a stop above the 50 EMA at $103.20 with a minimum target of an intraday low if not beyond.

We did get this low at 3:00, but then price formed bullish reversal candles at the lower Bollinger Band line, locking in the positive momentum divergence along with a slight positive TICK divergence – both hinting that the down-move was over.

Let’s zoom in to the structure on the 1-min chart to see additional fractals:


(Click for full image)

Notice that the larger downward 3rd wave itself ‘sub-divided’ into its own fractal period using the exact same principle.

These are the lessons I teach in each day’s “Idealized Trades” report which is both an educational piece (these patterns repeat indefinitely) to teach you better trading opportunities and how to recognize structure in real time so that you’ll have more confidence in real time as you make your own trading decisions.

If you’re interested, please check out the “more information” page of the Premium Content and see if this daily service might be for you.

The more you learn these repeatable patterns and price structures, the better you’ll be in real time to trade them when the opportunities present themselves again.

Corey Rosenbloom, CMT
Afraid to Trade.com

4 Comments

4 Responses to “SPY Intraday Elliott Fractal Opportunities”

  1. Anonymous Says:

    Corey – do you look at order flow, or as they say read the tape, as part of your trading day?

    It's something I'm interested in learning about.

    It would be great if you could do some educational posts on this, or at least point me in the direction of some decent info on this. There's a lot of stuff out there but despite that I'm still having a hard time finding any truly good educational material on this subject.

  2. Dominick Says:

    Great post Corey, thanks.

  3. Lighning Says:

    Hi Corey,
    Do you know of any tools for measuring (and forecasting) the timing of cycles? I.e. one could use oscillators to measure cycles, but the time of each cycle is difficult to predict…
    There are fibo time relationships from peeks and lows (you have shown these in some nice artwork) but do traders use Fourier or Neural Networks? Are there any other tools available?

    Cheers,

  4. Lighning Says:

    Hi Corey,
    Do you know of any tools for measuring (and forecasting) the timing of cycles? I.e. one could use oscillators to measure cycles, but the time of each cycle is difficult to predict…
    There are fibo time relationships from peeks and lows (you have shown these in some nice artwork) but do traders use Fourier or Neural Networks? Are there any other tools available?

    Cheers,