EUR/CHF - Follow up

I think it's interesting to take a look at a trade that didn't follow the (in my view) most likely scenario and what to watch for to limit any losses.

In my last post about this pair here I stated that the most likely scenario is that a wave 3 would follow, but unfortunately it didn't play out this way. EUR/CHF dropped 120 pips and then rallied back up.

Personally I gave a lot of pips back but that doesn't mean you have to lose money when this happens (providing you have a proper entry).

There are 2 big clue's that the decline wasn't a wave 3.

1. The assumed wave 3 didn't hit the 1.618 extension of wave 1.

2. After a 5-wave decline it rallied quickly back in wave 1 territory when price traded above 1,0887 (overlap !). So the decline from 1.10 is likely a X-wave.

So you know exactly where your count is wrong which is in my view the number one gift of the Elliott Wave Principle.

EUR/CHF - Early stages of wave Y lower

After the SNB shocked global markets by abandoning its long-standing cap against the euro EUR/CHF dropped to 9651. Then the pair rallied and reached nearly 1.12 in February 2016. The subsequent move down from 1.12 seems to be unfolding as a WXY combination and I believe we're at the early stages of wave Y.

The decline from 1.10 unfolded in 5 waves which suggests minor wave 1 is complete. Minor wave 2 is complete or we will see 3 waves up and in that case wave 2 will unfold as a smaller WXY pattern (see ALT in red). This ALT scenario is not unlikely because the move down from 1.0984 unfolded in 3 waves so this wave could be an X wave.

Long story short: I'm bearish as long as 1.10 holds.