Corrective Wave of a Breakout Move

The probability is high that Tuesday will be a wider range than Monday.




Following the down breakout move or Initial Swing Wave after 1300 ET, the market corrected only 38% of the Swing Wave range. I personally prefer 50% corrections; however, when the market has a strong conviction to move in one direction, we are lucky to get the 38% correction in order to initiate a short-term fade.

So, how do we know that the market will only give a 38% correction rather than the preferred 50%? We don't know for sure. But, there are times when it is worth the risk to enter the trade near the 38% level.




I have more confidence in the trade when I see that the NYSE Advance - Decline Line has traveled considerably past a previous pivot point.




Further confirmation was that the $TICK spent most of the day below the zero line.

All in all however, it is a judgement call.

Charles