Wave Patterns — Dump-bump-dump, A, B, C downwaves

Posted on Feb 28, 2011 by WHC Bassetti in Letters

The first pattern, on the left, derives from observations by ourselves.  That is, in an uptrend a downwave, often violent and quick creates a  downwave (dump, or sell-off)   which is arrested by buyers looking for bargains causing the bump.  They are shortly punished  for buying a downwave by another dump.  The wavelet plays itself out and cannier traders jump on the issue and create a power bar up and a surge (seen as the dotted line is crossed).  This pattern often furnishes us with an opportunity to re-enter a trend we exited (for whatever reason).  This pattern seems to be fractal and operate on large and small scales.  The trade can be signaled by the penetration of the dotted line and/or by the making of a new high.  The bottom of the wavelet down furnishes a good Basing Point (but with a tighter filter than a full trend filter).  Ironically buying when a new high is made is probably more conservative -- although many many investor/traders shy away from buying new highs.

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