Aug 072012
 

Is it possible to do an Elliott Wave Analysis of Egypt’s EGX30 index? Yes, of course. Take a look at the attached chart. You can see clearly that the second wave retraced wave 1 by 50%. That was followed by the third wave travelling just a shade over 161.8% of wave 1. We then got a 23.6% correction as wave 4, an early warning that wave 5 was likely to extend because the first wave and third wave were normal in size. Sure enough, the fifth wave travelled over 123.6% of the distance from points 0 to 3. Interestingly, the fifth wave finished with a diagonal triangle, a typical pattern that signals the end of a major move. Also, you can see the fifth wave is made up of 5 minor waves. The diagional itself has 5 tiny waves inside it. Everything fits perfectly into what Ralph Nelson Elliott told us to look for! Remember what I explained in my book “Five Waves to Financial Freedom”, that when we see an extended fifth wave finish, we should get ready for a speedy recovery back to wave 2 within the fifth wave. Look what happened with Egypt’s EGX30 index! Once the extended fifth wave was completed, we got a fairly quick move back to the second wave within the fifth wave. It always works like magic! Let us call that recovery wave 1.

Elliott Wave Analysis of Egypt's EGX30 index

Elliott Wave Analysis of Egypt’s EGX30 index

The subsequent correction should be made up of 3 waves, and this looks like its finished that too. That means we should get ready for a third wave move higher, unless the second wave itself was going to become a complex correction. Our clue will be with the speed of the rally. If we don’t get started soon on the upside, we will have to reckon with one more test downside, but as of now, the index looks positive. I think any swift move above the 5700 will encourage the bulls. Good luck.