This is preliminary, and I will need more structure before I can be more sure. But, I can count five waves down with balance from yesterday’s high (the 5 orange waves leading to blue 1). If this is in fact a 1, we may be in the blue 2 now. It may retrace to the orange box (typical), but it may also retrace to the 78.6% and close the gap fully as well.
I have trimmed some of my shorter-dated bear call spreads in the hopes that I can reopen them at higher prices. I have also trimmed some puts with the same hopes, but I will also keep many on in case this simply falls apart in case I have counted this wrong or it is some other structure that I do not yet understand. I think I will also add a small handful of calls here near these lows as a hedge since we have not actually broken out of this upward sloping channel (the green line). If we rally to the box or the orange line, I will probably dump them and retake my other positions. If we rally through those levels, I will hold the calls just in case.
The most ideal setup would be a rally for blue 2, then a crash to the green line into the close. Coming to a line like that at a close is important, because gapping through it defeats it. And so if we enter a blue 3 we would expect a gap and gapping under the trend line would help to kill it.
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