How to identify a trend correction and continuation
With the end of a correction, then trend continuation momentum will occur with the possibility that the trend will continue in the same direction as before the correction. The three ways are:
1. The price breaks at the corrective high level for an uptrend or a corrective low for a downtrend.
2. The price breaks the upper corrective channel (the upper channel line) for the uptrend, or breaks the lower corrective channel (the lower channel line) for the downtrend.
3. The RSI indicator breaks in the direction of the trend before the correction occurs.
Price Break At Corrective Level
The break at the corrective high level is like the daily GBP/USD example above. Traders can enter sell when wave B ends, and enter buy when level B is broken (break). Traders can enter buys above the corrective high level after the price actually breaks level B.
Price Break on Corrective Channel
Repeated corrections will tend to form a channel, both in uptrend and downtrend. The end of the correction is marked by a break of the channel line in accordance with the direction of the trend before the correction occurs. In the daily GBP/JPY example above, traders can enter buy after the price actually breaks the upper downtrend channel line, or enter the channel breakout zone.
RSI indicator breaks in the same direction as the trend before the correction occurs
In this case the identification of the breakout does not have to use ABC correction wave analysis, but based on the movement pattern of the RSI indicator which moves in the direction of the price movement trend, and then breaks in the opposite direction. In the EUR/USD H4 example above, traders can enter buy above the RSI break level.
This method is indeed aggressive considering that after the RSI break there can be another correction. The safest way is to combine ABC correction wave analysis with RSI break.
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