HK50 - 3 Wave Failure

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I've been somewhat neutral on this index since the stimulus pump, but now I think the chart is bearish due to this 3 wave failure that I've drawn on the left.

The failure is much more obvious on the day chart on the right with a whipsawing Shooting Star top.

But on the 4 hour chart we can see the 3 waves.

Notice that the 3rd wave completes with whipsaw to print a slightly higher high.

If you've been paying attention, you'll have some awareness that this is a market maker favourite manoeuvre; to tap higher liquidity beyond resistance before tumbling down to complete the bull trap shakeout.

Its not impossible that this correction could extend, but most likely this is the start of the next wave down.

This is not the type of pattern I would expect to see if another wave up is coming.

So I am now favouring this slumping into a downtrend for a while.

On highest time frame this has a good chance to resolve bullish.

As I covered in the video, this could be a high time frame 3 wave upside correction, that will correct to the 0.618 @ 18.7K, then into the real bull market.

There's no guarantee that it will work out exactly like that, but in terms of ratio, I think it is the most likely path.

So anyhow, I've entered a small short position here and I'll see how it develops but I am currently thinking to take profit around the 1:0.618 extension @ 19.1K.

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If correct then this will mean our Chinese stocks of interest will trend bearish for a while.

And if you did take some profit on BABA at the 1.618 extension @ $117.8, you are in dreamland here.



That is the power of these Phi related fib extensions; if you get them right then you end up selling exact tops or buying exact bottoms.

Not advice