Can one trade an individual stock using Elliott Waves? The answer is a definite yes, provided it is a well traded stock. Take Caterpillar, for instance. This stock has provided some nice trading opportunties in the past. Looking at the sharp recovery from the recent lows below $68, you could have picked up over 7% by being patient till it reached the 61.8% pull back. The mini fourth wave down from around 98 was an easy pick! But where does it go from here? Take a look at the second chart. It looks like we are in a B wave of a potential ABC correction that could go down to around 83. The B wave itself should be made up of 3 waves, and perhaps we are in the 3rd step of the B wave.
If you have read my book “Five Waves to Financial Freedom” carefully, especially the part dealing with fifth wave extensions, you would immediately see the logic of these charts posted here.
What could go wrong in this analysis? Perhaps the wave that I have marked as the fifth wave is only a 3rd wave? That is certainly a possibility, but a remote one. In order to safeguard ourselves from this possibility becoming true, we should wait for the downmove to start aggressively, and then join in. Those with deeper pockets can consider a tetative short near the prior high, but be mindful of an irregular B wave that could go above that top before it suddenly develops a fright and rushes back down.