This downtrend is a series of Internal 1-2-3’s.

We can confirm this downtrend by labeling each new Internal 123 with a 1, 2 or 3. Notice that the first set is in the upper left hand corner and represented a trend reversal. The second set of Internal 123’s continues to confirm the downtrend, as did the third, fourth, and fifth sets.

Notice that each #3 point also becomes the new #1 point for the next Internal 1,2,3 formation. Keep in mind the 50% Retracement rule, as it works equally as well here. If you missed the start of this trend, and wanted to trade in the middle of the trend, you would want to get in at the best price you could, and still make sure that, when you did get in, that the trend was continuing.

One way that you could do this is to wait until a new Internal 123 was being formed, and then place an Alert with your broker to notify you, so you could go short, just below the next #2 point when it is formed. An alternative way would be to wait until the #2 point did a 50% Retracement towards the #1 point (thus forming the #3 point), and enter the market to go short, when the #3 point reversed direction.

The upside of doing this is that you will enter the market at a better price; the downside is that you may enter the market at the wrong time, in the wrong direction. By it’s very nature, when the #3 point is formed, it also becomes the new #1 point.