A permission checklist for the end of a trend

Permission before a reversal plan

TradersWeek editorial reading: the end of a trend is a permission problem. Elliott wave analysis writes a falsifiable hypothesis. A pre-trade checklist withholds action until independent filters agree. Candlestick patterns may time the first order only after that permission is granted.

The archive workflow begins by framing a completed trend as a five-wave impulse, after which a three-wave correction is the expected next structure.

Elliott wave analysis writes the hypothesis

Elliott wave analysis labels five-wave impulses and three-wave corrections so a trend-ending hypothesis can be tested against later filters.

Wave-5 exhaustion is projected as a zone by connecting waves 2 and 4, drawing parallels from waves 1 and 3, and placing a 50% line between waves 1 and 3. A preliminary channel from waves 1, 2, and 3 is redrawn after wave 4 finishes so that wave 5 is expected to stay inside the updated channel zone.

Wave 5 is measured as 1.0, 0.618, 1.272, or 1.618 of wave 1, or as 0.618 of the span from the start of wave 1 to the end of wave 3.

Sequence checks that stay independent

A 5/34/5 histogram on about 100 to 140 bars is read for a wave-3 extreme, a wave-4 return to the zero line, wave-5 divergence, and whether the histogram sits above or below its five-bar signal line.

An 8/13/21/34 EMA stack marks an unfinished wave when price returns to the averages without piercing them. It marks sequence completion when the fastest average crosses the slower three after a close through the 21- and 34-period lines.

Rising or falling wedges, head-and-shoulders, and double or triple tops and bottoms are treated as Elliott equivalents: a diagonal, a 3-4-5-A-B-C, a failed fifth or 1-2, and stacked 1-2 counts.

A six-item pre-trade checklist

The pre-trade checklist is a six-item confirmation procedure that treats entry, abstention, and planning as one rule set. A reversal setup is not planned until at least four items agree. The trade then waits for the market to turn and uses predefined entries, stops, and more than one profit target.

Candlestick patterns as a timing filter

Candlestick patterns are one-to-five-bar reversal forms used as a timing filter after structure and momentum already agree. Candlestick reversals, including gapless morning-star, evening-star, engulfing, and tweezer forms, are used only together with oscillator divergence, reversal chart structure, and the EMA filter.