I would like to show my viewers on What is Wave Theory?
It is a predictive technical model to estimate the macro trend momentum. Each Wave (A,B,C and 1,2,3,4,5) represents a specific time frame of the index movement. Each wave will take months to see clearly. Thereby, patience is needed to see this formation.
What is important to highlight is that the 50% retracement of the Wave Length. In theory, using fibonacci retracement lines, it should breaks 2 support and retrace back 1 support, then continuous to break upward 2 supports and retrace back 1 support. Some even mention about the length of the wave length, but in this case, I uses Fibonacci as my reference lines.
What to take notes in Dow Jones Index, when there was a continuous long candlesticks (see above chart). The down trend wave will break "retribution support line".
In the last 2 weeks, DJI starts to have this symptom, it broke the support line and touched the Fibo's retracement 78.6% line. This might be the start of "Wave A" Formation.
Read Faber's Comment : http://www.cnbc.com/id/44031717
If you believe this wise man advice, and you think the Wave Formation of this chart makes sense to you.
You should "SELL at Resistance" when there is a rebound, gradually reduce your position.
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