Elliott Wave analysis of USDYEN or JPY has not figured on WaveTmes for a long time. In fact, I haven’t published any currency analysis for a while. That is not to say I haven’t been looking at it. Treasurers of large corporations and hedge fund managers have been in regular touch. I present you with a bunch of charts on USDYEN which you can use as part of your learning. This blog exists to help you get better at interpreting the waves, and also as a living book, a valuable resource that compliments my Elliott Wave Book, Five Waves to Financial Freedom. I suggest that you open each Elliott Wave chart on a new tab! Enjoy.
As you know, this blog is there to help you learn how to use Elliott Waves. There are hundreds of examples of how one could be successful in the financial markets using this kind of technical analysis. There are also a few scattered examples of analysis that didn’t work out. Sometimes the analysis itself was wrong. At other times, the market just changed. The key point to bear in mind is one has to be consistent in his/her approach to trading in order to succeed. Also, success should be measured in the medium to long term. You cannot take just one or two trades and determine the method won’t work if you fail.Anyway, I thought it is a good idea to share with you a recent trade that members of the exclusive club took, and it didn’t quite go as per plan. Let us see how.
It was 31st October when I presented these charts. The first two showcased how wonderfully Elliott Waves were able to pinpoint accurately the top for the Euro. I used a 61.8% Fibonacci retracement and also confirmed its importance by measuring a 161.8% projection for the Wave C at 1.3820 levels.
But what is the next trade idea? I saw the structure of the waves from 1.3830 and it looked like a double zigzag. If you have read my book “Five Waves to Financial Freedom” you would know that when we get a zigzag correction it often ends up above the top of wave 1.This was at 1.3560. However, I was willing to risk some money at 1.3610. I also reasoned that the second zigzag could travel deep. You can see these notations on the following charts.
The plan was to buy in 2 stages. One third at 1.3610 and the rest at 1.3560 with a stop at 1.3535, risking 40 pips to make at least three times that. But when the Euro made a low of 1.3582 and didn’t look like it was going to bounce, I sent out an email that we should get out if there was a recovery to 1.3630, and buy the full lot at 1.3560 (same stops). The Euro stayed afloat for some time, but it soon reached the second buy level. The supports around 1.3550 held for several hours, but the writing was clearly on the wall. I sent out another email saying that it might be a good idea to get out near the break-even level. But for all intents the trade was a goner.
What is the lesson here? Firstly, Elliott Waves don’t guarantee a profit. It does allow you to take early action to mitigate your risks. And when you are on the right track, it pays you handsome dividends. Secondly, we should be willing to accept that something is going wrong and get out of the trade quickly when such signals are presented to you. We should not stay married to a losing trade. Elliott Waves help you in the divorce from your position!
Hello Traders, Its been a few weeks since I updated this blog. Incidentally, I had not suggested any trade to the members of the Exclusive Club also for quite a while (if you leave out the trade on an Indian Stock that reached within a whisker of its profit objective). There is no need to be super active in order to make money! The best trades are those where you know the odds of success are stacked in your favor. I try to be patient for those set ups. Last Thursday, I spotted such an opportunity in USDYEN and I am happy to share parts of that with you. You can see from what follows below that trading is a completely different game from doing analysis. Regular readers of my blog (and my responses to comments) would know that I have always maintained that the Raison d’être for any analysis should be to make money, not to showcase one’s ability to come up with fancy charts! A key advantage that I enjoy is my knowledge that the markets can do whatever it wants, no matter how clever I try to be! Armed with that knowledge, I can sidestep some of the traps that snare most traders. This is not to say that I haven’t experienced any losses. It is just that these losses are less frequent and usually quite small compared to the winning trades. What follows is how I began my trade idea. 6 June 2013 I started preparing for this update when the USDYEN was at 98.52 around 6.30pm my time. Around 6.50, my wife reminded me that I have to go for my walk. The Yen was trading at 98.09 by then. You can see the last prices on the 3 charts. About 40 minutes later, it was already below 96! Such is the power of a C wave or a 3rd wave. You CANNOT afford to stand in its path. Of course, you could have positioned short, but that is ‘what could have been’ not what we need to do from now. Anyway, the key lesson for you is when a 3rd wave or C wave is developing, NEVER, NEVER try and pick obvious supports to go against that move. Now for the trade idea. By the time I am writing this, the USDYEN has bounced back to 97.23. In case it stops around 97.30 and starts coming off, there is a reasonably good chance to retest the 95.95 low, and possibly break it to reach 95.60. I suggest that you be patient for that move to happen. Place a small buy order at 95.82 and add some more at 95.62. Your stop can be placed at 95.40, risking some 30 pips. You are looking for a move back to 97.30 at least.
A little later I added an update that suggested that while we were waiting for the dip to our supports, we might head higher and if we see 97.65, we can actually sell there with a stop at 97.80. The USDYEN went only as high as 97.49 and from there it collapsed to a low of 95.53. We were now long of USDYEN. The recovery from there went to a high of 97.24, but I sent out an alert that we should take profits on part of the position at 97.05. Later on, when the USDYEN was around 96.70, I once again warned traders that we should get out of all remaining longs because the wave structure indicated another sell-off was ready to happen.The USDYEN subsequently declined to a new low of 95.02 before rallying strongly again. The key take away for you should be the following. Elliott Wave analysis is a great tool for traders. But you will be better off if you realize that it requires a lot more than an ability to compute Fibonacci ratios in order to make money at the market. All the best.
The Pound has been steadily gaining ground and is poised to reach the 61.8% retracement of its last swing lower. This comes at 1.5664, and is worth looking at closely. Besides, if we consider that the recovery is a double zigzag, the second wave ‘c’ has a 123.6% measure of wave ‘a’ at 1.5666. If we look at the internal waves of wave ‘c’ we see that the 5th minor wave will have its 61.8% measure of the distance from 0 to 3 at 1.5680. We also see that an Elliott wave channel top comes around that level. Considering all this, one might consider a SMALL short position at 1.5663 with a stop at 1.5683. If stopped, one should wait for 1.5778 and sell a bit more aggressively there with a stop at 1.5798. These are really counter-trend trades and I present them here so you could learn how I think about waves. It is not a recommendation!
As promised, I am producing some of the GBPUSD updates posted on the Premium Website. This first one below was dated 25 Feb 2013. The low for GBP on 1st March was 1.4984 and it reached a high of 1.5199 by 5th March. (Of course, we didn’t catch the full move to the top because I continued to remain bearish, and as this was a counter-trend move, the position was closed out sooner)
25 Feb 2013 UPDATE (On the Premium Website)
After a nice long walk, I came back and looked at the charts again, and have changed my mind about where a low-risk counter-trend trade is in your best interest. Take a look at the attached two charts and modify your tactics accordingly. The GBPUSD is still around 1.5140 as I am posting this. Good luck.
On 1st March I posted this update, urging people NOT to sell at 1.5050 if it got there AFTER a dip to around 1.4980. This saved them for selling too soon, as price recovered to 1.5199 as mentioned above.
1 March (another update)
While we should look to the daily and hourly charts to figure out our trades, it doesnt hurt to keep an eye on the very short term charts as the price approaches our levels. As I mentioned earlier there are supports between 1.4964 and 1.4980. That could produce a small round of short covering before the weekend. If you see a move towards 1.5050/55 , you may try a small short because I think we will likely stay under 1,5085 and test our supports. But don’t try shorts on any bounce AFTER it trades to 1.4980. We need to look at the charts again at that time. Remember, the short term trades aren’t for everyone! Most of you have come to WaveTimes with an intention of catching a large move (which means at least a 100 pips, or thereabouts)
On 5th March, I told traders to sell around 1.5250 because I felt the Pound was going down to 1.4880. However, it failed to go above 1.5199, and we missed that sell there. The confirmation that a top was in place came when the Pound came directly below 1.5040.
On 7th March I posted this. And incredibly, the Pound dipped to a low of 1.4966, recovered to 1.5012, came down to 1.4970 again, and rallied to 1.5080. On 8th March it touched a low of 1.4885 and recovered to 1.4958. See the comments below. All of this was for a one-time payment of $50.
As we dipped directly below 1.5040 yesterday (a level that has now become a solid resistance, and today’s high itself being only 1.5030) I am closing this thread. But as a parting gift to you. here is how I think it is likely to play out from here.
We are currently at 1.5000
I think we will first get a dip to 1.4960, then recover to 1.5015
From 1.5015 we will get another dip to 1.4940 levels (max 1.4915)
From there we will get a recovery to 1.4995 followed by a final dip to 1.4860.
Remember that I had said a few days ago that we should start buying from near 1.4880
Do so in stages, because we will get a large sized correction from between 1.4860 and 1.4880.
But always have a stop. It is one thing to have a trade idea, and quite another to manage the position properly.
And on 10th March, I gave yet another complimentary update:
There have been some requests for updates in GBPUSD. However, I could not post them here earlier because they were being shown to the members of the Exclusive Club.
I am posting three of the charts now, and will post the complete thread once the trade is closed.
As you can make out, it was possible to identify key levels and direction using Elliott Waves. The last chart shows a sell level around 1.5340, and the Pound reached 1.5319. The target was 1.5080 and it reached 1.5073. There is more on the other website, but I will post those afterwards.
I have often stated in this blog that we should use Elliott Wave Analysis to aid us in our trading decisions. Some people mistakenly believe that the goal of Wave Analysis is to make accurate predictions, and spend a great deal of time verifying i ftheir count is correct. I am also aware that some analysts showcase their wave-counting skills when things go right. Wave Times is different. I would like you to see how my wave count in USD/YEN was actually wrong, but the direction was right. I have no hesitation is accepting that my counts are often wrong, although it will become evident only with hind sight. My approach to the market is to use this invaluable tool in making the right trading decisions. Start by looking at my Elliott Wave update of 23 July 2012. (An easy way to get there is by looking at the menu, under Forex, and choosing JPY). In that update, I has suggested to sell the USD on any recovery for a move down to 77.20 and eventually down to 76.70. The USDYEN went up to 79.66 on 20 August and then came down to a low of 77.11. Note two things here. (a) it did not reach 76.70 and (b) in that update I had counted the waves as a 5-wave downmove. Both are wrong. But did it matter to the trader? Of course not. He/she knew that 77.20 was a good level, and some action needed to take place there. In today’s new update, I present you with an altogether new wave count of USDYEN.
You can see that I am now calling the 77.11 low as the wave 2 low. As you know, corrections can never be in 5 waves, so my July wave count was wrong The next chart shows you how you could have figured out where the first wave up would end.
In the third chart, you can see how I am breaking down the third wave into its components. I am also pointing out how I decided that we are in an extending third wave. This is a delicate point that you should take time to understand. Supposing I had labelled the green wave 1 as the 3rd wave, then the subsequent decline would have overlapped the top of Blue wave 1. That would have made me bearish if I was only looking at wave counts. But I would have been hesitant to buy after that. But the sharp recover that followed left me in no doubt that an extension was beginning. I had actually called up my clients and told then that we are now entering a huge bull run in the USDYEN, and importers from Japan should now be patient as the Yen was going to weaken significantly. If you had read my book “Five Waves to Financial Freedom” I have covered this phenomenon. If you have a short wave 3 and an overlap followed by a sharp rally to a new high, get ready for an extended third wave!!
The final chart is a close up view of the extending third wave. I am looking for a move to 88.40 at least, but the path to that could invove a pull back. Don’t sell to capture this correction. Instead, be alert to buy at a good support. Around 84.80-85.00 is decent initial support. As always you need to have stops on any position, but if you get stopped, be willing to jump back into the bull camp the moment it starts steadying and moving up again. I wish you the best of luck. (By the way, I am going to be in India to conduct a private seminar in the third week of January. Just thought will let you know) -Ramki (PS I posted this via email, after testing it out last week! Not sure if the formatting will appear correctly though…so please bear with me)
The EURUSD has moved agressively higher. From an Elliott Wave perspective, I think that unless the Germans come out with a negating statement early next week, the Euro will continue to stay bid and could reach 1.2945/60 initially and later on 1.3145. Trade from long side by buying on supports now until we get get a close below 1.2645. (sorry brief, but this is how it will be for the next few updates)
Ramki’s Elliott Wave Analysis of USD/CHF(Swiss Franc) appears on Marketwatch today.He explains
-How Elliott Wave analysis uses Fibonacci ratios
-How far did the third wave go in USD/CHF?
-How corrective waves alternate in complexity
-How to anticipate potential end points for the fifth wave
-What to expect now for USD/CHF
Go ahead and check out how you can use Elliott Wave Analysis to become a better trader!