Dec 132011

Elliott Wave analysis of Deutsche Bank’s stock price chart suggests that the decline into January 2009 finished with an extended fifth wave. Of all the patterns that one can use to anticipate future moves, an extended fifth wave is probably the most reliable. (See for example, Fifth wave extensions can make you rich)

The attached chart shows you how the internal waves of Deutsche Bank’s stock price movements are all related to each other, and it is fascinating, to say the least. We have already seen a relatively quick recovery to around EUR 55.25, which is, in my opinion, just the first leg of the move required to correct the whole sell off. Elliott Wave theory suggests that extended fifth waves experience what is known as a double retracement. What this means is the trader (or investor) should be prepared for a retest of the fifth wave bottom (occasionally even an overthrow!) But once the second test of the low is achieved, we will see an even quicker recovery than the first rally. The earliest target for the recovery is put at the wave 2 level of the extended fifth wave. This comes at EUR72 (or USD95 using today’s exchange rate).

For those who wish to see a fundamental view on Deutsche Bank, I suggest stopping by at

Dec 022008

The headline in Dealbook reads “Deutsche Rejects a Rescue, Even as Its Shares Tumble” and this prompted me to take a look at its chart. (meanwhile Goldman Sachs is said to face a $2 billion loss in Q4!). Back to DB, where you will observe an extended third wave (being 2.618 times the first wave) was completed at 27.96. By now you would have sensed that Elliott Wave analysis of stocks is more an art form, and we use Fibonacci ratio more as a confirming tool. With that in mind, can we label the recent low at $22.45 as an irregular ‘b’ wave? I think it is a reasonable guess. SInce wave 2 was a ‘flat’ correction, we should expect wave 4 to be a complex pattern, and an irregular ‘b’ wave will be just what Elliott ordered. If this is correct, a ‘c’ wave will take us marginally above the $50 level before a fresh bout of selling takes us down. Judging by the article in New York Times, that can coincide with DB finally bowing under pressure, and approaching the regulator for capital infusion. But how do we trade this stock from here? Should we buy some here for the potential move above $50 (capturing the 66% gain that seems to be offered if we are right?) I would suggest that any brave heart who attempts this trade should keep any long positions rather small, mainly because it is against the trend. I would more heartily support a short sale near the $50 level, especially if we get there directly. We shall see how it goes. Keep this in your watch list for now. Ramki

Nov 302008

I read the following in Friday’s FT and thought it is useful to quote here. “History provides some useful benchmarks. After the horrible 1973-74 bear market, equities traded up, though unevenly, until 1982 with six specific bull runs that generated an average 32 percent gain”…but, a buy-and-hold strategy over that time period yielded only 9% compounded annual gains, which merely kept pace with inflation. Accordingly, the idea of meaningful trading rallies may be the great lesson of equities following massive market corrections, similar to the one just suffered by investors and the one experienced in 2002-2002 period”

Needless to say, an investor will be better off using technical analysis to enter and exit the market. This blog will help you towards that end.

Related S&P500 links:

Was that the stock market bottom?
SNP500 revisited
S&P500 and Citi

Fifth wave extensions can make you rich!

Harmony in markets: S&P500
S&P 500: Potential Ending Diagonal Triangle

Ending Diagonal Triangle in S&P500?

S&P500 Elliott Wave update

S&P500 index: is a top already in?

S&P 500 update: where is the top?

S&P500 continues its rally

S&P500 remains resilient

S&P500 ready to dive?

S&P500 Update: May 19, 2009

S&P500 Elliott Wave update:21 May 2009

S&P 500 breaks higher: update 2 June 2009