2015issue C0434-39
Correction or reversal: a stacked Elliott-wave, Ichimoku, and triangle reading
This case study keeps pair selection and entry context apart. It then uses Elliott-wave placement, a descending triangle, and the Ichimoku cloud to decide whether a swing is still a correction or only an unconfirmed reversal.
- Choose which pairs to study from across-the-board strength or weakness, and reserve Elliott-wave and Ichimoku charts for entry context.
- Read a descending triangle as a correction that is more likely to continue the larger Elliott-wave trend than to start a reversal.
- Use the Ichimoku cloud as a volatility filter: wait for price to move from one side of the cloud to the other, then wait for higher highs and higher lows after a blow-off.
- Stay aside when a decline still looks like a correction, rather than buying the first bounce or guessing a top or bottom.
Two labels for one swing
A sharp swing invites two labels: correction or reversal. In this archive workflow those labels are not interchangeable. A correction is a countertrend swing that is expected to resolve in the direction of the larger Elliott-wave trend rather than start a new one. A reversal is a change in the larger trend, and it stays unconfirmed until higher highs and higher lows, or a comparable structural break, appear after the dust settles.
The first job is to place the current swing inside that larger trend. Only after that placement does the chart ask whether price has cleared a volatility filter.
Select the pair, then time the entry
Pair selection is framed first as across-the-board strength or weakness. Across-the-board strength means a currency that is advancing against most counterparts at once, and that scan chooses which pairs are worth studying.
Elliott-wave and Ichimoku charts are reserved for entry context rather than for choosing which market to watch.
Place the swing inside the larger trend
An Elliott-wave reading is used to place the current swing inside a larger trend. It is not used to forecast a specific future price path.
Once the swing is placed, a pullback or a contracting range can be read as continuation, or only as a possible turn. The wave count supplies that context. It does not name the next price.
Read a descending triangle as a pause
A descending triangle is treated as a corrective pause. The triangle-pattern reading is a contracting range that is more likely to continue the larger Elliott-wave trend than to start a new one.
The pattern can support a continuation hypothesis. It does not, by itself, confirm a reversal.
Wait for the cloud transfer
The Ichimoku cloud is used as a volatility filter, not as a tool for guessing a top or bottom. Price must travel from one side of the cloud to the other. Entries wait for that transfer.
After a blow-off spike or plunge, the Ichimoku rule is to wait for higher highs and higher lows to form before treating a reversal as confirmed. A blow-off is a late panic spike or plunge that is recognizable only after the fact. It is not used as an entry signal.
Stay aside while the decline is still a correction
If an oil decline is only a correction before a possible retest of older lows, staying aside is preferred to buying the first bounce.
Editorial: that stay-aside rule is the point of the stack when a forex swing still fits the continuation reading. A reversal hypothesis remains unconfirmed until the cloud transfer, and then the higher highs and higher lows, have appeared.
Let structure audit the old story
Charts are used to test whether a trader is still defending an old fundamental story after the price structure has already changed.
Editorial: the archive workflow does not ask the chart to pick an exact turning price. It sequences three checks. Is the swing still a correction inside the larger Elliott-wave trend? Has price moved from one side of the Ichimoku cloud to the other? After a blow-off, have higher highs and higher lows appeared? Until those checks pass, a reversal remains a hypothesis, not an entry.
All readings on this track · 9 readings
- 2000Constructing Ichimoku spans, scaled oscillators, and volume breakout filters
- 2000Constructing Ichimoku clouds from midpoints and time shifts
- 2007Ichimoku as a time-linked trend and support stack
- 2007A failed support plunge as a classroom case
- 2013Swing entry rules as one testable procedure
- 2014Ichimoku cloud, market breadth, and dominant cycle detection as a case study
- 2015Correction or reversal: a stacked Elliott-wave, Ichimoku, and triangle reading
- 2017Build an Ichimoku cloud from five plots
- 2017Ichimoku cloud price alignment as bullish confirmation