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Tuesday, September 13, 2011

stopped out of USO post analysis

I sold my puts automatically when USO hit 34.80, my hard stop.
I'm struggling with whether to call this trade a success or a failure.
On the one hand, losses were kept very small.  As a trader, you know you are not always going to be right.
On the other hand, I certainly could have made less risky decisions and waited for better market confirmation at the expense of price and option premium.

I do think it's interesting that 35.14 is still untouched  at this time, which was my original stop, and the high of my proposed minuette wave (i).  We hit 35.09 during the trading day today.  Looking at the actual crude futures, however, that level has been breached.

So where does that leave the wave count?  Well, the only way we're getting higher highs is if subminuette degree wave e was not over.   So I'm going to back-track, and look at where I might have miscounted one of the waves.  The first thing that stands out is that my prior proposed final wave e had no subdivisions on the 4H chart, which I previously decided to ignore.  The rest of the waves prior to e look pretty cut and dry, so I'm going to assume those are correct for now.  In addition, I decided to look at the actual future, to see if any differences arise.

The first thing I noticed in the chart above, is that the prior labeling of minuette (i) down in my prior posts, which appeared to be a clear five waves down in the USO, is definitely an A-B-C on the future, where the C wave subdivides into a visible five waves.  Now we'll zoom in to the 30min chart of the last couple waves.

 Aha!  So it turns out that my proposed subminuette degree e wave, which should have been an A-B-C structure, actually was a five wave move!  The first subwave was a leading diagonal, and the fifth wave extended.  That whole move, therefore, was just micro degree ((A)).  Micro degree ((B)) was the expected three waves came down and almost touched the trendline and reversed.  That's another clue I missed before in my euphoria.  This last push higher, therefore, must be a ((C)) and therefore must subdivide into five waves.  That is what I'll be watching for tonight and tomorrow morning.  When ((C)) completes, we'll then likely have our final e.  Hopefully the trading gods will be kind and provide low risk short entry during the trading day.

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Notation


Wave DegreeMotiveCorrective
Grand Supercycle((I)) ((II)) ((III)) ((IV)) ((V))((a)) ((b)) ((c))
Supercycle(I) (II) (III) (IV) (V)(a) (b) (c)
CycleI II III IV Va b c
Primary((1)) ((2)) ((3)) ((4)) ((5))((A)) ((B)) ((C))
Intermediate(1) (2) (3) (4) (5)(A) (B) (C)
Minor1 2 3 4 5A B C
Minute((i)) ((ii)) ((iii)) ((iv)) ((v))((a)) ((b)) ((c))
Minuette(i) (ii) (iii) (iv) (v)(a) (b) (c)
Subminuettei ii iii iv va b c
Micro((1)) ((2)) ((3)) ((4)) ((5))((A)) ((B)) ((C))