Jul 312014
 

Many traders blindly trade without paying attention to the market clues that tie up with Elliott Wave. This article discusses some strategies.

This morning, I saw a news item that went as follows “South African telecom firm MTN is keen to enter the Indian shores. CNBC-TV18 learns from sources that MTN may go for a strategic acquisition route for its India entry. Interestingly, a lot of buzz was created on Twitter after Harsh Goenka, chairman of tyres-to-software conglomerate RPG Enterprises tweeted from his handle @hvgoenka: “MTN doing due diligence of a large Mumbai-based telecom company. Will this mega deal happen?” He, however, did not answer the subsequent questions from Twitteratti. Sources told CNBC-TV18 that MTN is open to picking up financial stake in existing Indian telecom player. They say MTN is in talks with three Indian telcos — Reliance Communications , Tata Teleservices and Idea Cellular . However, Goenka’s nudge could be towards the Anil Ambani-owned Reliance Communications that has twice in the past held talks and even agreed to part with majority stake for management control in one instance.

Read more at: Moneycontrol
So three companies are being mentioned and I looked at all of them, and decided to present some of the charts for you to learn from. As I have often been saying, this blog is to help you learn Elliott Waves. For those who are seeking trade ideas, the place to go is wavetimes.net, but again, that forum is meant for traders and investors who have serious money at risk, and for the experienced traders. If you are already a member of that exclusive club, be sure to add the email wavetimes.member @ gmail.com to your contact list as otherwise my trade ideas and notifications could land in your spam folder.

The following are only some of the charts relating to Idea Cellular Ltd because, of the three companies, I believe this stock is the most likely candidate, even though Mr Goenka thinks it is RCOM (I continue to own shares in RCOM from the time I discussed buying it here at wavetimes.com when it was less than half its current value)

The first chart shows the labels for the wave 1 to wave 4 of Idea Cellular Ltd. This exercise allows you to figure out where we are in the bigger picture for this stock. You can see that wave 3 was extended, having reached 223.6% of wave 1. I suggest right-clicking each image and opening it in a different tab!

Wave 1 to wave 4 of Idea Cellular Ltd

Wave 1 to wave 4 of Idea Cellular Ltd

Further examination reveals that wave 4 has come down by 38.2% of wave 3. You will also see the principle of alternation at work. As wave 2 was a simple correction, wave 4 became complex, in the form of an irregular correction.

Wave 2 was simple, so wave 4 was complex

Wave 4 was an irregular correction

Now that we have satisfied ourselves that wave 4 has been completed, and that we are in wave 5 for Idea Cellular Ltd, we can go about deciding the targets for wave 5. As explained in my book Five Waves to Financial Freedom and elsewhere in this blog, we can usually compute easily three possible targets for wave 5. This is shown in the following chart.

Fifth wave targets for Idea Cellular Ltd

Fifth wave targets for Idea Cellular Ltd

But many beginning traders and analysts fail to pay attention to other clues. For example, being aware of nearby resistances as shown below.

Nearby resistances for Idea Cellular Ltd

Nearby resistances for Idea Cellular Ltd

And finally, they also fail to take into account the possibility of being wrong. Even with 30 years of doing this stuff, I make allowances for errors, which is why the trades discussed in wavetimes.net are carefully chosen to give us the best chances for success. With Idea Cellular, despite the fact that there are certain additional clues that the MTN stake speculation is pointing in their direction, Elliott Wave analysis warns us to be aware of a different possibility.

Can this be a corrective ABC rally in Idea Cellular Ltd?

Can this be a corrective ABC rally in Idea Cellular Ltd?

Having examined the various sides of the picture, we can now decide whether we should buy, and if yes, where we should buy this stock. And more importantly, where we should place a stop loss. But you can do that yourself, given the vast amount of inputs shared with you over the last so many years on this blog.

Good luck.

Apr 232014
 

In this post, I am going to present you with Elliott Wave analysis of Wockhardt Ltd. One of the members of my exclusive club had approached me for a consultation back in January 2014. It was the 14th of January, to be precise, and the stock was trading at Rs 413.65. The member sent me the following brief note:

“I consider myself as long term investor. I hope your advice/analysis will help in some of my long term investment decisions. By long term I mean I could hold for more than a year, if required.

Could you please look into the following stock for me: (I understand this will cost me 2 credits)
Market – India – NSE
Company – Wockhardt limited
Symbol – WOCKPHARMA
Exposure – None at this time.

Comment: This stock has comedown from around Rs. 2000 and currently trading at 420. It saw a low of 350 about 3 weeks back. Did it start its uptrend? Since the company is in pharma industry, it is subjected to lot of FDA regulations. I think FDA’s adverse observations made the stock to drop in recent times.”

I looked at the chart, and could make out that it was going to be a challenge to come up with a sound analysis. I prepared a set of 10 charts and will share with you some of them here. Please note that this is not a marketing message. The idea is to allow readers to see the value of Elliott Wave analysis, and how someone with experience with Elliott Waves could come up with a sound strategy. I recommend that you open the charts in different tabs.

Wockhardt Big Picture

Wockhardt Big Picture Elliott Waves

Wockhardt First Target for C wave

Wockhardt First Target for C wave

3rd wave target within the C wave

3rd wave target within the C wave

Verifying 4th wave as correct

Verifying 4th wave as correct

Identifying possible end of wave 5

Identifying possible end of wave 5

Analyzing minor waves of wave 5

Analyzing minor waves of wave 5

As can be seen from the above, I have finally come to the conclusion that a major correction is now over, and the rally that started off from that low is the first wave of a new cycle. Now comes the more interesting part, the one about where to buy.

Have we finished 5 waves of wave 1?

Have we finished 5 waves of wave 1?

WCKH-10-14Jan14

So we have identified a low-risk entry point. However, there were other considerations like risk-management and what size to expose. Yet, an initial entry point has been identified.

This member went long a decent position size at an average rate of 430. He probably purchased some on the way up after the dip, a smart investor I must say. He understood the size of the upcoming recovery, and wasn’t penny wise when it was the right time to take a risk. A majority of traders do the opposite. They take big risks when they should be cautious, and take small risks when everything points to a favorable move! Anyway, this is what happened. I am sharing with you just the plain chart without any notations. We got a dip down to below the 400 mark twice in the days that followed and the stock is up by nearly 70%.

The power of Elliott Waves

The power of Elliott Waves

Oct 232013
 

Trading NIFTY using Elliott Waves by Ramki of Wavetimes.com

In my last Elliott wave update on the Nifty Index (posted on 3 July 2013), I had presented you with a big picture scenario. The third chart in that post had one level as 5112 being 61.8% of wave A. It is gratifying to note that on 28 August, the index reached within 6 points of that level (5119) before it commenced another move higher. To those who don’t understand markets, 5119 will appear far away from the 4300 level which was written in my notes at the bottom of that chart. These people will have serious difficulty in making any money if they pursue technical trading. There are a couple of things that one needs to understand about Elliott waves. A big picture outlook is just that. It gives us a broad road map. Timing an entry to capture the next large move will demand paying careful attention to waves in the shorter cycles. In today’s post, I am presenting you with an example. This is a 10-minute chart! You can see that I have put some tentative Elliott wave labels on it. These are still work-in-progress, and are by no means conclusive.

In my book “Five Waves To Financial Freedom” I have explained in detail what happens when a five-wave move is completed. The main challenge lies in determining whether the move is actually finished. There are many ways of counting a move, and what you see here is one example. A short-term trader could have benefited by counting it like above, and by selling at 6220 with a very tight stop. I have often stated that trading the markets requires a little more than an ability to count waves. This is where many of us suffer from weakness. We choose to believe that what we are able to ‘see’ is how the markets will behave. If there is one important lesson you need to master before you expose real money it is the willingness to accept you could be wrong, and knowing beforehand what you will do when you are proved wrong. You need to evaluate various scenarios, and determine which gives you the best risk-reward trade off. Then, you need to be patient for the markets to come to your desired level. And if it does come there, you need the courage to actually pull the trigger!! And finally, you need to be diligent to monitor the position to take corrective action if the market sends out fresh clues that are counter to your thinking. It is precisely because of these challenges that you need to be wary of trade ideas that come at you thick and fast from various sources, including TV channels. It is so easy to say ‘buy here with a stop there’ and not bother with that recommendation beyond that date. After all, there are new recommendations for you to look at the next day!! Anyway, I wish you good luck with your trading. This blog aims to teach you the methods, and nothing more.

Ramki of WaveTimes.com
http://www.wavetimes.com

Oct 092013
 

Elliott Wave analysis is one of the most versatile tools in the hands of a trader, provided he/she knows how to use it correctly. At WaveTimes you have the opportunity to learn more about the Elliott Waves.

Old timers know that my favorite formation is where we see an extended fifth wave. In fact, it has been a recurrent theme in WaveTimes that extended fifth waves can make you rich. You can do a search for that in the web and see the various examples given in this blog. I believe the concept has also been well covered in the book “Five Waves to Financial Freedom”. In today’s post, we will look at a popular index in the Indian markets known as Bank Nifty Index.And you guessed right, we will see another example of an extended fifth wave and what happened next. And importantly,these concepts will work in ANY well traded market, and even if you don’t have any interest in India’s BankNifty Index, I suggest you spend a few minutes to read and understand the Elliott Wave ideas enumerated below.

The way to start counting your waves is from a significant top or low. Let us start with the important top around 13,430 that was posted on May 20, 2013. I suggest that you right click each image and open it in a new tab.

Bank Nifty Index Wave 2

As you can see, the first sell off is labeled as wave 1 and we got a 50% correction of that as wave 2. The next wave down was the third wave, and this was followed by a ‘Flat’ correction as the fourth wave. This fourth wave was 38.2% of the third wave as shown in the Elliott Wave chart below.

Bank Nifty Index Wave 4

After the fourth wave was completed, the markets set off earnestly to the South and we got an extended fifth wave. As you know, a wave is known as an extended wave when its proportion is unusually long in relation to its counterparts in the cycle.

Computing Extended fifth wave in Bank Nifty Index

The extended fifth wave shown above has traveled 138.2% of the distance seen from the start of the first wave till the end of the third wave, i.e. from points 0 to 3.But what happened afterwards is most instructive. True to its form, once the extended fifth wave completed its own minor fifth wave, we got a massive bout of short covering, and the market raced back to the level of wave ii within the extended fifth wave. This is what I have taught you many times in this blog and in my book. Imagine how much you could have made by buying near the end of the extended fifth wave!

My next Elliott Wave chart shows how the rally evolved from the lows. The chart below shows that we got a second wave that came down by 70.7% of the first wave. As you probably remember, there is something known as ‘alternation’ in Elliott Waves. If wave 2 was a simple correction, we should expect wave 4 to be complex. Likewise, if wave 2 was a deep correction (as is the case here) we should anticipate the 4th wave to be shallow. These are all illustrated here for your benefit.

Wave 2 in Bank Nifty uptrend

And finally, could one have anticipated where the fifth wave will finish for teh rally from the bottom? Of course, yes! Remember what you read in “Five Waves to Financial Freedom”? We compute the target for the fifth waves by measuring the distance from 0 to 3 and then calculating some ratios. In the present case, the fifth wave finished exactly at the 61.8% measure of the that move. See the next chart for this.

Wave 5 in Bank Nifty uptrend

Well folks, that brings us to the end of this post. What you need to know is that it is possible to anticipate the terminal points of moves, and while there are no guarantees that it will work, you will have a chance of taking a low-risk trade at those points. Trading is all about taking sensible risks. This is what we should all be doing. I realize many of you still have difficulty in counting waves, but that is a challenge you will overcome with practice. Good luck.
Ramki
http://www.wavetimes.com/

Sep 132013
 

In this Elliott Wave Analysis of Kuala Lumpur Stock Index, you can see the challenges facing the trader who has to decide whether the index has completed a five wave move already, or perhaps it has just posted a third wave top, and we are currently in the fifth wave. Let us start by looking at the first Elliott Wave chart. Here, you can see my Elliott Wave labels marked out clearly. The fourth wave has corrected the third wave by exactly 38.2%.
KL Index fourth wave
Elliott Wave Analysis of Kuala Lumpur Stock Index by Ramki from WaveTimes.com

Even by looking at the proportion of wave 1 relative to wave 3, you can make out that the third wave had extended.The Wave Principle says that we should expect one of the waves to be extended, but it doesn’t rule out the possibility of two extensions in a five wave sequence. This is illustrated by looking at the next chart which zooms into the fifth wave. In the Elliott Wave count shown below for the fifth wave, you can see that there are two ways to count the waves.

KL Index extended fifth wave

The first count is to label the sub wave 3 as having finished just above the 1600 level, and assuming that we have posted an extended fifth wave at 1827. This is currently my preferred count. As you know from my book “Five Waves to Financial Freedom”, when a fifth wave is extended, we should expect two things to happen. First, there will be a swift correction, but second, and more important, is the possibility of a double retracement of the extended fifth. This means we could see a full retest of the highs, and occasionally even an overthrow to a new high, before another swift sell off. Perhaps this is what is happening now. Should this hypothesis be correct, we should be extra careful near 1835 levels. Be alert for a reversal there, and join in on any swift down move with a stop above the high posted. However, there is another possibility that I have indicated in the chart. This is we have only seen wave 3 finish at 1827, and we are currently in wave 5. You will then compute a 38.2% and a 61.8% of the distance from 0 to 3 to figure out where the 5th wave will finish.These come in at 1860 and 1980. I think there is a better chance for 1860 to cap the move, and so we can summarize by saying that the index will probably post its top between 1835 and 1860 and come off towards 1600. We shall see. Trading the markets of course is a completely different game. It requires you to be patient for the right moment, and for the risk-reward to be properly aligned before you risk real money. I try to implement this strategy at wavetimes.net. But this blog gives you the tools so you can try your hand at it yourself. Remember, picking a top or a bottom is a vanity that the trader needs to entertain with great judgment. It is often safer for the first down move to start and join in on the first pullback. All the best.

Ramki