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.

Jun 112015

Hello folks,

CNBC India reached out to discuss the outlook for Nifty, Tata Motors, ICICI and SBI. Here is the link for that:

Trading is all about listening to the clues that the market sends us, and taking appropriate action. A few weeks ago, when I was in NYC, I had mentioned that we will likely get a bounce from 8080 or 100 points below that. We did get a recovery, but the personality of that recovery clearly indicated that it was not the real thing. The next level where I might get interested in discussed in the video you see in the link. Good luck.

Jan 232015

(Please read important update at the end of this post)

Ever so often, Elliott Waves helps the investor from making mistakes. For example, when I read the news that Rakesh Jhunjhunwala, the ace investor,had increased his position in Polaris, I decided to see what Elliott Waves had to say. Sure enough, it warned against following the Badshah this time.

Many investors don’t even read the news fully. Here are the headlines, and the final paragraph from the Economic Times.

Polaris rallies after news that Mr Jhunjhunwala upped his stake

Polaris rallies after news that Mr Jhunjhunwala upped his stake

The additional investment was made in Q3 of 2014

The additional investment was made in Q3 of 2014

Maybe I am reading this news all wrong, and he actually made fresh investments just the previous day! But it was essential to see what Elliott Wave analysis would say. Here are a couple of charts.

Polaris Consulting completed a 5-wave rally

Polaris Consulting completed a 5-wave rally

As you can see from the Elliott Wave chart above, Polaris Consulting has already completed a five wave rally near the highs, and the fifth wave was 38.2% of the distance from point ‘0’ to point ‘3’. Many of you are familiar with this approach to anticipating where a fifth wave will end. I have also explained this in detail in my Elliott Wave book, ‘Five Waves to Financial Freedom“.

The next Elliott Wave chart shows how the correction is unfolding. As you know, once a five wave upmove is completed, we will get a three wave correction. And the most powerful of the three waves down will be the ‘C’ Wave. It is clear that Polaris is in the middle of such a ‘C’ wave.

Polaris Consulting in C Wave

Polaris Consulting in C Wave

It is also useful to look at some Fibonacci retracements as shown in the next Elliott Wave chart. You can see that Polaris had paused briefly at a couple of prior Fibonacci retracement levels on the way down, but clearly, it shouldn’t appeal to any Elliott Wave trader to be blindly following the Polaris News.

Fibonacci Retracements in Polaris Consulting

Fibonacci Retracements in Polaris Consulting

IMPORTANT UPDATE:23 Jan 2014: I have heard back from some WaveTimes members that I have not taken into account the fact that Polaris has demerged with “Intellect Design Arena”, and that stock has its own value, and hence it is incorrect to say that investors in Polaris who purchased the stock in the last two days have made a mistake. I am indeed guilty of not knowing this development. However, I did take care to check if there was any news about Polaris that caused it to reverse exactly one day after the news I referred to above. There wasn’t! This merger has been in the news much earlier. The stock has simply adjusted lower today. This should give us pause to think about a company that has a stock split.The chart of a stock that has been split is immediately adjusted historically. But in the case of a demerger, where a portion of the company is separated, how do we treat that stock? What is the value of the demerged entity 1 year ago, 2 years ago? If you know the answer, please post in the comments area.

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 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.


Jun 192013

Hello Traders, In this Elliott Wave update, I am presenting you with a trade idea that was shared with the members of the exclusive club about 10 weeks ago ( April 4 to be precise). That trade idea was to invest in Reliance Communication and I am happy to note that today the stock has returned 100% profits to those who have held it in their portfolio. The reason for posting it in this blog is solely to demonstrate how one should go about using Elliott Waves. This blog seeks to teach you that. Enjoy.
4 April 2013 Many of you have been following my recommendation on Reliance Communication on my blog. The recent news about the rapprochement between the Ambani brothers augurs well for this stock, and the technical picture supports this view. Take a look! Good luck.

8 April 2013 I wonder if you have read my book “Five Waves To Financial Freedom”. In one of the chapters there, I have described a common scenario where a trader waits patiently for a 2nd wave and buys a stock. It starts moving in his favor, and he watches rubbing his hands with delight. But quite suddenly, something happens, and the stock starts coming off, this time it breaks below his purchase price. Our trader’s mood swings from joy to despair. He cannot bear to see his paper profit all vanish, and now he sees a paper loss. Of course, his original stop loss is still far away, but that is a different thing. In his mind, all that matters is he has lost all profits that he could have made, and now he has the compulsive urge to cut his loss before it runs away. So he either immediately gets out, or he gets out as soon as he sees a break-even price. After a few sessions, the stock roars higher, leaving him in the dust. Our trader tells anyone who would listen, including his wife, friends and his cat/dog that he was long at the right level, but was shaken off by the stupid market. I am narrating this story because you should not make the same mistake. We had 2 buy levels for RCOM. The first one was done, but if it dips again to the second level, you should still consider buying there. Don’t rush to sell! If your stop loss is done, well, that is the price of trading the market. You cannot hope to trade without expecting to lose some trades. But if you sit on your hands for most trades, and get into one when you feel you cannot wait any longer, then that is the trade that will most likely result in a loss! Be consistent, trade amounts that wont bother you too much if it results in a loss. *But trade a size that makes sense*. You cannot invest Rs 10,000 in a trade, pay me $50, pay the brokerage etc and still hope to make money. This is why I had said that members of this exclusive club are not meant to be small traders. You should know what is the correct position size for any trade. This size depends on your individual financial situation. You should know already that money is there in the markets for the intelligent trader. Take all trades, and over time you will see your bottom line is growing nicely. Good luck.

Apr 122013

Elliott Wave analysis of Infosys Ltd tells us that we are currently in the C wave of a serious correction. Investors have already lost over 20% in just one day! There is more to come. However, we are approaching some short term supports, and those who have deep pockets can consider a very quick counter trend trade at the 50%  retracement level.

But as always, keep your stops not too far away A safer trade will be to wait for the 61.8% level of 1975. Good luck.

INFY12apr13a INFY12apr13cP.S. This went out to members of the exclusive club earlier. One of our recent trades in the Indian market has yielded a profit of 23% already.