Aug 122016
 

There have been persistent requests from my readers in India for articles on how to use Elliott Waves to invest in Indian stocks, and this post looks at Hindalco. Let us start from the February 2016 low of 58.80. A lot of traders would have been reluctant to buy Hindalco when it was falling like nobody’s business. But in the short span of six months, Hindalco has already reached the 150 level, returning 150%. Such spectacular returns go only to the astute investor, who lies patiently in wait for the right opportunity and goes in aggressively.

The careful investor

You don’t always have to be picking the bottoms to make money. You could have invested in Hindalco at the right time using Elliott Waves at many junctures on the way up. In my book ‘Five waves to Financial Freedom” , I have discussed the concept of reflex point. Once Hindalco went past the reflex point in a five wave move, the careful Elliott Wave investor would have watched the stock on a daily basis to see when he could join in the upcoming third wave. The first chart below shows the reflex point as well as the five wave rally that took it past that point.
A five wave rally past the reflex point

You can see from the above chart that wave 2 was brief, falling only slightly below the 38.2% retracement level. When the explosive rush to the upside happened with a gap and an expansion in volume, you would have immediately committed some funds. That is because you now know that wave 3 is very likely underway.

Buying in the midst of a third wave

I teach many strategies for real-time trading in my seminars and workshops. Today, you get a snippet. Read this post as well as the one below (Walldan Group Inc analysis) and you will see what I am hinting at. The following two charts suggest that Hindalco could have potentially reached the end of an extended third wave. Mark my choice of words! I try to remind myself everyday that no matter how smart I think I am, the market is determined to show me my place! Also bear in mind that we can never be sure where an extension will finish!

Hindalco reaches a possible top wave top

Here are the internal waves of Hindalco’s third wave to support my hypothesis.

Hindalco's internal waves of its third wave
Minor fourth wave

Finding out Hindalco’s minor fifth wave target

As you know from FWTFF book, you can anticipate where the fifth wave will finish by measuring the distance from point 0 to point 3, and then computing some Fibonacci ratios of that. Here you can see that Hindalco’s minor fifth wave finished exactly at the 38.2% measure of 0-3. Not bad at all!

Computing a wave 5 target

Using the guideline of alternation to your advantage

One of the advantages of learning Elliott Waves is you can anticipate the level of difficulty in an upcoming move by looking at what happened earlier. Since Wave 2 was a simple correction, we should expect wave 4 to be complex. This is as per the guideline of alternation. You will see this explained well in FWTFF book. The key point with respect to Hindalco is we should be patient now for a proper dip to at least the 38.2% levels. While we are waiting, there could be a brief period of a price over throw to around 155.50. Let that pass! If you are like me, you will rather miss a move than trying to chase a rally that is potentially near its end. This is different from jumping on to a running train as it is leaving the station.That analogy is for joining a wave 3 in its early stages.

Wait for a wave 4 correction in Hindalco

How high can Hindalco’s fifth wave go?

Well, once you have purchased Hindalco on a wave 4 dip, you can do some calculations yourself. This calculation is no different from what you did earlier for the minor wave 5 of the third wave! But because wave 3 was extended, there is also a chance that wave 5 could become equal to wave 1. These are all explained in FWTFF book in detail. So maybe you should give it another read! Enjoy.

PS: I don’t do any hard sell of my premium service. It is mostly by word of mouth. But numerous investors have benefited by engaging me for a consultation regarding their market exposures.

Aug 122016
 

Elliott Wave analysis of the Willdan Group stock (NASDAQ:WLDN)reveals some interesting clues. The most important one of course is it has likely embarked in wave 3, and that means a minimum upside target of 7% from even the current levels, but likely much more.

Willdan Group, Inc. is a holding company. The Company provides professional technical and consulting services to utilities, private industry and public agencies at all levels of government. It operates through four segments: Energy Efficiency Services, Engineering Services, Public Finance Services and Homeland Security Services.

As always, WaveTimes members would like to enter a position when it is advantageous. But pull backs during a wave 3 phase is usually limited. The purpose of this blog is to share with you my approach. If you remember, WaveTimes is an extension of my book Five Waves to Financial Freedom. Those seeking specific analysis on individual stocks might want to look at the premium service.

Before we begin, you might wonder what prompted me to look at this particular stock. Truth be told, I have never heard of it until this morning, when good old Bob D suggested that we might be in Wave 5. As it has been a while since I wrote something on WaveTimes, I thought why not share it with you too.

WaveTimes Philosophy on using Wave counts

You might remember that my philosophy is to leave the long-term forecasts to others, and focus instead on what can be used in the near term. I also abandon a wave count once it has served its purpose. That means I am not married to it and will never try to justify a wave count. It is what I feel! (I am referring to the wave counts). A few weeks from now, if you show me the chart of WLDN, I might offer you a different count. What matters is whether we can use the wave count to trade. It is precisely for this reason why traders from around the world value what WaveTimes has to offer. Having gotten that off my chest, let us jump straight to the first chart which shows the internal waves of wave [1].

Wave 1 of WLDN

Lo and behold, minor wave 3 had extended to reach 238.2% of minor wave 1. A newbie might say ‘hang on, 238.2% is not a fibonacci ratio!’. As explained in FWTFF, this number shows up often enough in the real world that it is futile to quarrel over whether we need to see only a Fibo number to allow us to include it in our armory. You also notice the alternation between wave 2 and wave 4 in terms of extent, time, and complexity. Kapish!

The next chart shows you how we could have identified the end of minor wave 5. It finished at 50% of the distance from point 0 to point 3.
End of minor wave 5 in WLDN

Trading wave 3

Now we need to discuss something rather important. How on earth could we have known that the wave 2 will go no lower than a 38.2% retracement shown in the following chart?
Wave 2 dipped only to 38.2% in WLDN

Alas, if only everything was given to us in a platter we would all be dancing in Hawai with pretty girls. There is really no way one can tell how low a second wave can go. All we know is it cannot go below the bottom of wave 1. So how can we ever get on board a third wave move? Now that is a legitimate question. I can share with you dozens of stories (actually it is hundreds of stories over my 30 year career) where I have missed a third wave move because I was waiting for it to dip. Some lessons are never learned, and some are learned after great struggles with one’s self. When you see a sharp rally, accompanied by gaps and increasing volume, you just have to BUY first and ask questions later.If you wait for a third wave to pause and come back for you to finish your coffee and discuss with your team or whoever else you check with, then you will miss great levels to buy.
Just remember one thing. This advice works only for 3rd waves! And for you to know that it is a 3rd wave, you should know that the first wave is finished! How will you know that? I suggest you read FWTFF again. Most people say they have read it three or four times and every time they learn something new.

Now for the last chart in this episode. How high can wave 3 go? I have learned the hard way that we should take things one step at a time. Let us start with the equality measure. And who knows, maybe we will get lucky and get a dip as sub wave ii of the 3rd wave from the equality measure.
How high can wave 3 go in WLDN

The goal of all analysis is to make money. With the methods you learn here, you should be able to improve your score. All the best.

Jun 252016
 

Elliott Wave analysis of the German DAX (DE30) index would have guided us well ahead of time about the deep correction that is underway in the European stock markets. This post discusses how we could have used Elliott Wave analysis to anticipate key turning points in the benchmark index, and taken steps to lighten our equity exposures. The steps I use have all been explained in detail in the Elliott Wave book “Five Waves to Financial Freedom”. Let us start by looking at the various waves since the significant low of 3588 on 13 March 2009.
Wave 1
The first wave, or what we label as wave 1, went from the low of 3588 to a high of 7442. If you look at the intra-day charts of the German Dax during this period, you will be able to see that this wave 1 had its own set of five sub waves. You will also notice that sub wave 3 within this wave 1 was extended, in that it traveled more than 161.8% of sub wave 1. Thus, I would have determined that wave 1 was extended, giving a low probability for either of the upcoming impulse waves to extend. However, the more interesting development happened subsequently. But first, let us look at the chart.

Wave 1 of the German Dax index

Wave 1 and wave 2 of the German Dax index

Wave 2
Wave 2 was a complex correction. It has traced what is described in the Elliott Wave book “Five Waves to Financial Freedom” as an irregular correction. Notice that sub wave b posted a high that went above the end of wave 1. We then got a deep sell off as wave c to compete a three-step complex correction. The fact that wave 2 was deep is important at that time because it signaled to us that wave 4 will likely be short and simple.

Wave 3
Next we look at the third wave, or wave 3. Observe that it reached slightly higher than the 123.6% Fibonacci ratio projection of wave 1.

Wave 3 of the Dax index was a normal wave

Wave 3 of the Dax index was a normal wave

Wave 4
As anticipated earlier on, wave 4 was a brief and short correction. It was also a normal zigzag correction. Traders and investors would have added to their holdings on this dip. When I advise my high-net-worth clients and fund managers, I recommend them to add more to their core holdings during this fourth wave dip.

Wave 5
And finally, Wave 5 finished exactly at the 61.8% measure of the distance traveled from point 0 to point 3. This is quite an amazing phenomenon, and has been described in detail in my book. Now you tell me, which other approach to the financial markets can be more accurate than this in anticipating the end of a bull cycle!

Wave 5 of the German Dax index finished exactly at 61.8% of 0-3

Wave 5 of the German Dax index finished exactly at 61.8% of 0-3

Conclusion:
I agree that it is not easy for traders and investors to be able to label waves with confidence, which is why many high networth individuals and hedge fund managers seek the advice of professionals. But, you too can improve your performance in the stock market by paying simple attention to some relatively straight forward rules and guidelines. I wish you all the best. Ramki

May 112016
 

The writeup that follows will use Elliot Wave analysis of USDCAD to arrive at some strategic conclusions. But first, a brief background. Most leading players are currently neutral in their outlook for the USDCAD. The Bank of Canada has made it clear that it is willing to act should recent strong data turn out to be temporary.They are also concerned about the downside risks to the outlook from a stronger CAD.In this environment, the CAD has weakened recently.Our goal is to use Elliott Wave analysis to determine the direction and scale of the upcoming moves.

Four Elliott Wave charts of USDCAD are presented. The first chart shows the big picture. It is a weekly chart. We start with the significant low of July 2009 at 0.9403 and see that maybe an extended wave 3 was posted at 1.4656 in January 2016. We look at the sub waves inside the extended that third wave and infer that maybe we are on the right path.

Elliott Wave Chart of USDCAD

Elliott Wave Chart of USDCAD

In the next Elliott Wave chart, we reason out that as wave 2 was deep, wave 4 is likely to be brief and short.

Are we in wave 4 now?

Are we in wave 4 now?

We will now look at the supposed wave 4 in detail. It looks like wave C within wave 4 has ended with a minor diagonal triangle at the fifth wave position in wave C. So a recovery back to the top of the diagonal triangle (also prior wave 4 level) seems likely. But we can’t jump in and buy right away. That will be suicidal. It might be a better idea to wait for a decent pull back, say by 50%, of the latest rally and start building a long USDCAD position in stages. Immediate strong resistance lies around 1.3250 levels.

UASCAD may have completed wave 4

UASCAD may have completed wave 4

A sensible trader will always consider what could go wrong with his analysis. We do that next in this Elliott Wave analysis of USDCAD.

Alternate wave count for USDCAD

Alternate wave count for USDCAD

While we have this alternate count in place, I am still considering a move to at least the prior wave 4 is likely. Later on, if we get a fresh round of selling, and see the USDCAD back down near 1.2170, then we will be happy to buy again there.

There are many other examples of using Elliott Waves in this blog. I am sure you will find them interesting. Enjoy!

Apr 232016
 

If you are a market savvy investor or trader, and especially if you are an institutional player, you are probably familiar with SBND, which is the ticker name for DB 3X Short 25 Year Treasury Bond ETN
(NYSEARCA:SBND). This post about how to use Elliott Wave analysis to “time” your exposure to this ETN will be of considerable interest to you. (For the others, briefly, the index to which this ETN is linked measures the performance of investments in Ultra T-Bond Futures contracts traded on the CBOT whose underlying assets are U.S. Treasury Bonds with a remaining term to maturity of not less than 25 years from the first day of the futures contract delivery month.

The principal advantage of SBND are four fold. First, you gain a leveraged exposure , 3x actually! Second, you gain exposure to a short bet on the futures (which means you are betting interest rates will rise) by going long on the ETN. Some institutions can only go long). Third, SBND is structured as an exchange-traded note (ETN), meaning that they are senior unsubordinated debt instruments issued by a bank; ETNs generally exhibit lower tracking error, but do expose investors to the credit risk of the issuing institution (in this case, Deutsche Bank). Finally, because the SBND ETN compounds only 12 times per year, it will be less susceptible to both an erosion of returns in choppy markets and an enhancement of returns in trending markets. Let us now turn to the main story of this post, how to use Elliott Waves to get a better entry to the market.

The first Elliott Wave chart of SBND shown below is a weekly chart that goes back to 2010. You can see that from a high of around 30, the ETN has collapsed to 3.41. Remember, this is a leveraged bet, and the move is amplified when the 25 year (+) T Bonds respond to interest rate expectations. Now even with an untrained eye, one is able to make out that we are in the fifth wave of the sell-off. Elliott Wave theory states that when a five wave move ends, we should expect a significant correction of that move. So, if we believe that US interest rates will rally, and T Bonds will weaken, then a short position will be the right way to trade. Buying SBND will give us a leveraged bet is that direction. So let us begin the analysis. I suggest that you open each chart in a new tab so you can see it clearly.

A five wave sell off in SBND

A five wave sell off in SBND

In my Elliott Wave book, ‘Five Waves to Financial Freedom‘, I have explained how to identify the possible end points for a fifth wave. The above chart shows that 3.23 is one such target. We have already seen a low of 3.41. and given the scale of the down move, these few points are within the scope of market noise. But we will validate our count by looking closer at the components of the fifth wave. Elliott Wave principle says that each impulse wave is made up of five smaller waves. The following chart shows the Fibonacci Ratio relationships of some of the sub waves, and the color-coded notations will help you better understand my analysis. Observe that I have placed a question mark after the pink-colored wave 5, wondering whether the 3.41 low has fulfilled the measurement criteria that I use to help validate the analysis.

The fifth wave of SBND has 5 sub waves.

The fifth wave of SBND has 5 sub waves.

Just like in the first chart, I am going to present you with the Fibonacci ratio measurement for subwave 5 in the following chart. You can see that subwave 5 finished almost precisely at the 123.6% measure of subwave 1!

Subwave 5 lands precisely at the 123.6% projection of subwave 1

Subwave 5 lands precisely at the 123.6% projection of subwave 1

When it comes to risking money, it makes immense sense to be aware of alternate targets. After all, one will be silly to be presumptuous about market turn levels. These other levels are shown below.

Other possible targets for subwave 5

Other possible targets for subwave 5

So we have established that either the bottom is already in place, or at worst we will get a dip to around 2.68. Now comes the decision point, the time to determine our tactics. First of all, we need to know how much profits are available on this trade. When a five wave move is completed, the ensuing reversal will usually take the price to the prior fourth wave level in the same degree. If you look back at the first chart above, you will see that the pink colored wave 4 falls around the 10 level. So that is the medium term target. Of course, it is not going to be a straight line move. That is not the way how financial markets behave. Indeed, the subwave iv (green color) will offer some good resistance (and trading opportunity) as we gradually make our way higher. But knowing that we will visit the 10 level in the next few years is itself an edge.

Establishing targets for the eventual reversal

Establishing targets for the eventual reversal

Now that we have established the risk-reward trade off, and also the maximum adverse downside, we can think about how to structure our exposure. Remember I mentioned the possibility that we could still go down to 2.68? Well, that will happen if we are currently only in minor wave 4 within the fifth wave. The general market is not keeping a tab of these wave counts, but the crowd psychology will cause a setback when we reach either the 38.2% or 50% retracement of the wave 3 shown below. A medium term investor will use that setback to start building his position.

Tactics for building an exposure to SBND

Tactics for building an exposure to SBND

The above discussion is a technical approach to building a position in an ETN that offers a leveraged exposure to the Long Term US Treasury Bond market on the short side. Elliott Wave Analysis works very well in any freely traded market that is liquid.And the same holds good for this ETN as well.

Apr 012016
 

Readers of the Elliott Wave Analyses on this blog would remember that on 8th February it was suggested that investors in Freeport-McMoran Inc. might consider buying on a dip between 50% and 61.8% of the rally from the $3.52 low. That low came on 11 Feb at $4.65 (over 18% below the $5.72 when we had discussed this stock). Wonder of wonders, the market decided that the correction below the 50% level was adequate for wave 2, and we saw a magnificent wave 3 unfold.

As you all know, Elliott Wave Principle says that the third wave is the most power of the three impulses. And the upward cycle will be made up of 5 waves. Those who took the risk and the signal have seen their money double is just about a month. Now isn’t that a great example of Elliott Waves at work!

Here is the Elliott Wave chart of Freeport-McMoran Inc (FCX) as it appears today.

Elliott Wave Analysis of Freeport-McMoran Inc

Elliott Wave Analysis of Freeport-McMoran Inc

Feb 232016
 

Truth be told, I first heard of this index some 15 minutes ago when I received an email from good old Bob.D. So I googled it and read the entry in Wikipedia.

“The Value Line Geometric Composite Index is the original index released, and launched on June 30, 1961. It is an equally weighted index using a geometric average. Because it is based on a geometric average the daily change is closest to the median stock price change.

The daily price change of the Value Line Geometric Composite Index is found by multiplying the ratio of each stock’s closing price to its previous closing price, and raising that result to the reciprocal of the total number of stock”

Can’t say it made me any wiser ๐Ÿ™‚

But a look at the charts was quite revealing, and I am happy to share them with you.
I suggest that you open each chart in a new tab so it will be easy to go back and forth. Like always, my comments appear on the charts themselves and so I won’t add any more fluff. Enjoy and share with friends.

This first chart is a monthly chart going back almost to the time I was born. Pay attention to the time frame and the color coding that will help you spot where we are in the progression.

Valug23Feb16a

Valug23Feb16b

Valug23Feb16c

Valug23Feb16d

Valug23Feb16e

Valug23Feb16f

Valug23Feb16g

Feb 082016
 

The global stock market is so vast that the more eyes there are to spot the approaching end of a five-wave pattern, the better off we are! I should thank Bob D for drawing my attention to Freeport-McMoran Inc (FCX) -NYSE. The following discussion covers the Elliott Wave analysis of this stock. You will see how the various twists and turns in FCX were all following the dictates of the Elliott Wave Principle.

When we commence the analysis of any instrument, it is always better to start with the bigger picture. So we commence our study with the weekly chart of FReeport-McMorRan Inc.You got to remember that the goal of any analysis is to provide you with a framework to base your investment or trade. Such a framework will give you an orderly way to approach the market. It doesn’t guarantee you profits, but you will know quite early whether you are on the right track or not, and that knowledge alone is well worth the time you invest in this process. So lets get started with our first Elliott Wave chart. I suggest that you keep opening each chart in a new tab to save you time.

On 20 January 2016, FCX made a low of $3.52. We see from the chart below that a complex correction has developed from the high near $61, probably unfolding as a double zigzag. The end of the second zigzag was projected to land at a 138.2% projection just a shade above the $4 mark. Perhaps the 3.52 low marked the end of this major correction?

FCX4Feb2016a

Now let us quickly go down to the more recent moves. Notice the green arrow in the chart above? I suggest we start our next wave count from there, as it looks like a pivot point.Two things stand out clearly. We can make out a set of five waves from near the $24, and to our delight, there is a further set of 5 minor waves inside the fifth wave that is quite clear.

FCX4Feb2016b

In order to give us more comfort that about this fifth wave, we will delve deeper to see if the waves hold some Fibonacci ratio relationship to each other. The chart below shows that sub wave ii corrected the sub wave i by 50%

FCX4Feb2016c

Next we see that the sub wave iii was extended. An extension is when an impulse wave travels more than 161.8% (Note: this is my own interpretation of when to label a wave as extended). In this case, sub wave iii went as far as 223.6% of wave i.

FCX4Feb2016d

You might remember from your reading of my book ‘Five Waves to Financial Freedom” that when a third wave is extended, it is normal for the fourth wave to be short and typically correct to just 23.6% of the just completed third wave. You can see from the Elliott wave chart of Freeport-McMoRan Inc below that sub wave iv went exactly to the 23.6% retracement target. This sort of reinforces the feeling that we are on the right track!

FCX4Feb2016e

And finally, we see that the fifth wave was exactly 50% of the distance from the point ‘0’ or the starting point of subwave i to the terminal point of subwave iii. This is again quite text-book-like, and is something to be looked at in wonderment!

FCX4Feb2016f

I leave you with two more charts for careful consideration. My Elliott Wave comments are on the charts themselves. Remember, this blog aims to teach you some of my methods. I am not making a recommendation here. But if you are patient, and if you can identify 5 waves up from the bottom, then buying into a 50% to 61.8% pull back is a most logical thing to do, especially if you are a believer that Elliot Wave Principle works! In case you are not convinced, simply look at the hundreds of other examples in this blog! All the best.

FCX4Feb2016g

FCX4Feb2016h

Dec 262015
 

As many of you are aware, I offer a consulting service at WaveTimes.net. Occasionally I share some of those cases with you to help you learn Elliott Wave analysis. The following is a consultation I did with a trader based in Singapore who wanted to discuss the outlook for USDSGD. Please note that wave counts are always a work-in-progress. While it worked out as anticipated at that time (the analysis was done on October 14, 2015 when USDSGD was trading around 1.3870) the outcome from the current levels needs a fresh look.

Establishing the broad big picture in USDSGD from an Elliott Wave stance

Establishing the broad big picture in USDSGD  from an Elliott Wave stance

Establishing the broad big picture in USDSGD from an Elliott Wave stance



Figuring out weaknesses, if any, in initial analysis

sgd14Oct15b

Considering alternative wave counts and deciding which is appropriate
sgd14Oct15c

Using Fibonacci Ratio Analysis to validate our wave counts
sgd14Oct15d

Seeing if we are consistent in our approach
sgd14Oct15e

Fifth Wave target using methods taught in Five Waves to Financial Freedom – Elliott Wave book

sgd14Oct15f

Illustrating how each impulse wave is made up of five sub waves
sgd14Oct15g

Showcasing the ‘fit’ of the waves in the bigger picture – Elliott Wave structure

sgd14Oct15h

Fibonacci Ratio Relationships work even within sub waves!
sgd14Oct15i

Elliott’s principle of alternation
sgd14Oct15j

Detailing the finer aspects in intra-day Elliott Wave charts
sgd14Oct15k

Anticipating ending points of USDSGD in the near term

sgd14Oct15l

Formulating a recommendation considering potential moves
sgd14Oct15m

In case you are wondering how it turned out, well here is a screen shot as of today, with the key turning points after 14 Oct marked out for you.

Elliott Waves do work in USDSGD as can be seen here
USDSGD26Dec2015

I hope you enjoyed the learning experience in this post. It will be great to see this shared with your friends in the market place. Best wishes, Ramki