A new article has been posted on Forbes.com and will be yet another learning experience for readers of this blog.
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.
In the next Elliott Wave chart, we reason out that as wave 2 was deep, wave 4 is likely to be brief and short.
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.
A sensible trader will always consider what could go wrong with his analysis. We do that next in this Elliott Wave analysis of 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!
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.
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.
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!
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.
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.
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.
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.
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.
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 🙂
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.
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?
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.
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%
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.
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!
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!
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.
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
Figuring out weaknesses, if any, in initial analysis
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.
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
In this post you will learn how to trade Chipotle (NYSE:CMG) using Elliott Wave analysis. I had sent these charts to members of the exclusive club on November 24, 2015 when the stock was around $559.The main idea was there was a good chance for a move lower after recovering to around $585. The stock reached $585.80 the following day. It moved slightly above 585 on December 1 and 2, but on both days it closed below $585. And then we got a 12% move down to $515 on 7 Dec.
This blog aims to share some of my techniques with you, so you too could refine and improve your trading style. Used in conjunction with my book “Five Waves to Financial Freedom” the numerous charts that are presented in WaveTimes will open your eyes to what is possible using Elliott Waves. Enjoy and share with your friends.
As many of you know, I also have a professional website which caters to the needs of high net-worth individuals and experienced traders. This website is at www.wavetimes.net. I have today posted an example of a consulting assignment in that website, and thought that you will appreciate a link to that post.
I will try and post a few more examples in the coming weeks for your learning. This blog is a living book, an extension of Five Waves to Financial Freedom [ or vice versa 🙂 ]. Enjoy!
This post contains Elliott Wave Analysis of Silver, using the continuous futures charts of Silver traded in the Multi Commodity Exchange of India.
I prepared these Elliott Wave charts for a client back in September 2015. This is not the entire pack, but most of it is here. Use these charts to learn! Don’t use them to trade the market at the current levels. Remember, Elliott Waves are only an aid to your trading. It is a very dynamic thing. If you like what you see here, tell your friends. Unlike wavetimes.net which is a paid service, this blog is entirely free. It exists solely to teach you some of my techniques. So go ahead and enjoy.I suggest that you right click on each image and open them in a different tabs.That way, you can go back and forth easily.