Mar 092011
 

A reader asked how to deal with freak price movements, and cited the stock of Ashok Leyland as an example. Apparently, such movements are common in mid-cap stocks.
Well, I decided it is worth the time to look at Ashok Leyland, and here is the Elliott Wave Analysis. As you can see, we need to make an honest effort to fit in all GENUINE market movements (sometimes we get a bad tic in the chart, like some crazy trader updating an incorrect price that gets picked up by the system. Such bad tics can be ignored).
Enjoy!

  13 Responses to “Elliott Wave Analysis: Labelling Freaky Price Movements”

  1. Thanks once again Mr. Ramki for highlighting on how to deal with freak price actions. I guess at the end of it all it’s the emotional discipline within a trader and to back oneself on the decision taken and sticking to the wave counts to avoid such random noises on a very short time frame.

  2. Dear Ramki

    As per my knowledge when ever a corrective diagnol type structure develop in the impulsion, just like the one mentioned in here, the correction should state waves as 1,2,3,4 and 5 rather than labeling it as abcde. however, in either case 2&4 or b&d must overlap which is not the case in your labelling. Dont u think u are breaching the elliott rule here??

    Regards

  3. Sir, Can we trade in options based on wolfewave study. For example, if wolfewave predicts 5650 levels (more or less) and a big fall after can we take a position in nifty options like buying calls of 5600 or buying puts of 5300? Has any study or any backtesting done in this area? As all are aware that option trading has immense risk due to time decay, sudden spike/fall etc. I would like to know if there is a way to co-relate it with options will fetch good gains.

    Thanks & Regards,
    Ravi Prasad

    • Hi Ravi
      Honestly, till today I have never heard of this service. Of course, that doesn’t mean a thing about how good or reliable they are. But I’d like you to know one thing. No one can predict the market. A good analyst can assess the probability of something happening with greater confidence. After that, everything comes down to money management. In order to be successful, one needs two separate skills. Analytical and trading skills. If you want to trade in options, you need to refine your trading skills, not necessarily subscribe to expensive services. Good luck.

  4. Can I accumulate Ashok Leyland at 46-48 range ?

    • Vidhan, An investor’s decision to accumulate a stock will be based on his understanding of the fundamentals of the company, and the weight the investor wishes to assign to that industry in his portfolio. Assuming you are happy with including Ashok Leyland in your portfolio, then one could use Elliott Wave analysis to decide a low-risk entry level. The first step is to wait for a 5-wave rally to finish, and then buy on a pull back, with stops below the low seen. It looks to me that Ashok Leyland is in a 5th wave of the rally from 45.10. Assuming we do reach above Rs 54, preferably 56.20 in this run higher, we should then wait for a deep pull back of atleast 61%. You will then start buying small lots at various levels, but stop everything out below 45.10. Hope that explains?

  5. Sir another wonderful educative post. An ending diagonal and a correction to previous wave 4.

    In response to another comment here, I feel that labeling is not of utmost importance. Some label it as a-b-c-d-e as it’s in three waves, others label it as 1-2-3-4-5 as it is motive. But the biggest concern is whether we make money out of our counts & whether our counts see to that the overall visual harmonics of the pattern is maintained.

    Also sir, I have a request – It would be great if you could post on counting gaps. I have observed that usually gaps occur in third waves, but sometimes I feel very uncomfortable on counts when the prices open with a gap on a reaction to overnight moves abroad.

    With Warm Regards
    Muthu

  6. Superb labeling – a lesson for anyone trying to understand wave-labeling. Have a nice vacation Ram.
    guru

  7. ASHOK LEYLAND CLOSED @ 56.25 AS PER YOUR POST DATED 10.03.2011

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