Jun 102014

Elliott Wave analysis can be applied to any number of securities, be an individual stock or index or commodity, or just about anything that is traded in a liquid market. Today, we will take a look at the Elliott Wave analysis of Arabtec Holding Co. This us a popular stock that trades in the Dubai financial markets. In case you haven’t heard, Arabtec Holding Co. (ARTC) headed for its biggest three-day rout since March 2013 as some investors speculated Aabar Investments PJSC, its second-largest investor, is cutting its stake in the Dubai builder. To tell you the truth, I hadn’t heard the news either until AFTER I prepared the charts and mailed them to a friend who runs a large trading desk in Dubai.

The first chart below shows a couple of interesting things. For example, we have a failed 5th wave within the larger first wave. That was followed by a deep correction that went past the 50% retracement level.

Wave 2 of Arabtec

Wave 2 of Arabtec

We then got a fantastic rally was an extended third wave, which went to the 361.8% projection level of wave 1.

Wave 3 went to 361.8% projection of wave 1

Wave 3 went to 361.8% projection of wave 1

After an extended third wave, it is usual for wave 4 to come down to the 23.6% retracement level. This is what happened with Arabtec

Wave 4 down to 23.6%

Wave 4 down to 23.6%

We can anticipate the end of wave 5 by establishing relationship with wave 1. With Arabtec, it was 123.6% of wave 1.

Anticipating end of wave 5 in Arabtec

Anticipating end of wave 5 in Arabtec

If you are wondering how far the fifth wave went past the target, take a look here

And what happened at the end of a five wave move?

Arabtec probably has a little more ground to the downside, so we have to look at the near term charts to figure that out. I am sure you are now capable of doing that exercise. Go ahead, and give it a shot.

Dec 012013

After posting a significant low on 23 August 2013 at 100.15, BHEL uptrend has gathered steam and has closed above the weekly trend line resistance. Furthermore, it has closed ABOVE two recent tops. I had discussed the bullish possibilities for this stock in Elliott Wave Analysis of BHEL that was posted on 12th September in Wavetimes. Although the stock didn’t quite make it down to the preferred buy level, the directional clue given by Elliott Waves has proved correct. Let us now take a quick look at what key levels lie in the immediate vicinity.

The chart you see below has some tentative Elliott Wave counts posted on it. It is important for you to understand that at this stage it is too early to confirm what will happen in the big picture. One thing, though, is clear. The 3rd wave did not bear the personality that is normally associated with it. So there is still a chance that this will turn out to be a double zigzag. But we need not worry about it just now. Given the current momentum, we shouldn’t be surprised to see a visit to 166 plus levels where there are some Fibonacci confluence levels. A gradual move to that level will mean it is time to take profits there. On the other hand, if it explodes higher, the stock can end up compensating the slow performance in wave 3 by having a very strong 3rd wave within an extended 5th. I am mentioning all this because trading the market using Elliott Waves is different from posting a chart with the waves neatly shown after the move is over. We need to be aware of various possibilities, and have a clear cut strategy carved out in advance. In the meanwhile, I would like to consider buying a small amount on any dip to near 152.70 with a stop below 152. That is a small risk to capture a move to 166 and beyond. While we are trying to limit our risk here, the uptrend in BHEL will be called into question only if we trade below 144.65, which is the top of wave 1 inside the current 5th wave.

BHEL uptrend

Nov 182013

Elliott Waves Analysis can be a powerful tool in the hands of an alert trader. A few days back, I had suggested that Hindustan Dorr Oliver stock (NSEI:HDRR) Was set to roar having already completed a five wave down move and looked ready for a bullish triangle breakout. Well, the stock has delivered with the upside breakout from the triangle, and reached a high of INR 15.65, which is well over 20% up from the level of 12.53 it was trading at on the day Wave Times presented the analysis to you. Take a look at the Elliott Wave chart below to see how it turned out.

Hindustan Dorr Oliver gains 20% on bullish triangle breakout

Elliott Waves correctly anticipated a huge rally in HDRR

Unfortunately, the company has also delivered some bad news! And it is trading down from the recent highs. Elliott Wave fans are anxiously asking whether we will be able to rally back, because we had suggested a target of nearly INR 18. What is the outlook for Hindustan Dorr Oliver from here, they ask. Well, the way I use Elliott Waves is to use a count till it is useful, and then look elsewhere for new opportunities. But I can say that there still exists a chance for a recovery because we have come down by 50% of the latest 3rd wave within the fifth wave. Maybe we are in the process of completing wave 4 after which we will get one more recovery? Also, the upper boundary of the bullish triangle, where there were several tops, will now act as a support. Only a close below that upper trend line will cause a bout of anxiety, and perhaps a revisit of the Elliott Wave counts. We shall see.

Nov 072013

The Elliott Wave chart of Hindustan Dorr Oliver (HDRR) stock has an interesting chart formation. Let us start from the significant high of 159.40 seen in August 2010. Since that time, the stock has been nothing short of decimated, and investors have been pulverized. The low seen was 7.55. The recovery from that low has been slow, which is natural. Let us see if we can count some waves from the top. Actually, it may make better sense to present a wave count from a more recent top, 39.80 seen on 9 July 2012. DO you see a five wave pattern completed from there?


What happens at the end of a Five Wave Move?

Hindustan Dorr Oliver seems to have completed a five wave move from a significant high of 39.80. What happens when a five wave move is finished? Elliott Wave theory says we will get a correction that should be bigger than either of the two minor corrections seen in the just finished five wave move. Wave 2 was from 21.69 to 31.43, traveling 9.74. So we should anticipate the current rally to reach 9.74 or more from the low of 7.55. The minimum target then becomes 17.29, which is 30% higher than current levels.


A Triangle Formation?

Do you see a bullish triangle pattern? Perhaps this is an X wave separating a zigzag correction? Or more optimistically, perhaps we are in a complex wave 2 after which we will get an explosive third wave? In any case, a close above the upper trend-line of this Elliott Wave chart will send the bears scurrying for cover, and give the bulls more confidence.


Using Elliott Waves

The main reason why traders use Elliott Waves is because it gives them an edge, which I would like to call an Elliott Wave Edge. While there are no guarantees about making money, this edge allows traders to anticipate which direction the next move is likely to be, and also compute how far the move can take us. Traders are also able to figure out where they should place a stop if the next wave that develops doesn’t meet the Elliott Wave rules, or Guidelines. You can read about the Elliott Wave edge and how traders win in this article here. You can also read detailed explanations about Elliott Wave Theory, the rules,and wave personality in this reference article.

Sep 122013

This post originally appeared on Wavetimes.com on 26August 2013 and has been restored after a crash of the database. Hence the date is shown differently above. My apologies to those who posted comments, as these have been lost too:

What is the outlook for BHEL? Has BHEL seen a significant low at 100.35? Should we buy BHEL on the next dip? What does Elliott Wave analysis suggest for BHEL? Let us start with a long term (weekly) chart of BHEL. Wave 5 that started around Rs 270 seems to have posted a 50% measure of the distance from 0 to 3.


Next, let us look at the moves from 270 in detail. The first chart below shows that at 161.97, wave 3 was exactly 161.8% of wave 1. And the second chart of BHEL shows that we have already been to 78.6% of the distance from 0 to 3.


BHEL28Aug13bOn top of that , we seem to have just exceeded a reflex point. Despite all this, the weekly chart looks quite bearish and we shouldn’t be surprised if the stock fails to overcome the 140 levels, and to attempt another test of the recent lows.

Next, take a look at another Elliott Wave count for BHEL, shown in the chart below.


This chart would suggest that we have just finished a 3rd wave, and a complex fourth wave is likely to be seen. A complex correction could take many forms, and one of the most common corrections is a ‘flat’ correction where wave B reaches or exceeds the starting point of wave A. So, if you see a failure around 140, that could well be a trigger for a retest of the lows. It might be a good idea to consider buying some BHEL near there for the medium term. We will revisit the charts when it gets there, just to make sure that the decline has the personality of a B wave. Will someone please send me a reminder at that time.