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.

Oct 232013
 

Trading NIFTY using Elliott Waves by Ramki of Wavetimes.com

In my last Elliott wave update on the Nifty Index (posted on 3 July 2013), I had presented you with a big picture scenario. The third chart in that post had one level as 5112 being 61.8% of wave A. It is gratifying to note that on 28 August, the index reached within 6 points of that level (5119) before it commenced another move higher. To those who don’t understand markets, 5119 will appear far away from the 4300 level which was written in my notes at the bottom of that chart. These people will have serious difficulty in making any money if they pursue technical trading. There are a couple of things that one needs to understand about Elliott waves. A big picture outlook is just that. It gives us a broad road map. Timing an entry to capture the next large move will demand paying careful attention to waves in the shorter cycles. In today’s post, I am presenting you with an example. This is a 10-minute chart! You can see that I have put some tentative Elliott wave labels on it. These are still work-in-progress, and are by no means conclusive.

In my book “Five Waves To Financial Freedom” I have explained in detail what happens when a five-wave move is completed. The main challenge lies in determining whether the move is actually finished. There are many ways of counting a move, and what you see here is one example. A short-term trader could have benefited by counting it like above, and by selling at 6220 with a very tight stop. I have often stated that trading the markets requires a little more than an ability to count waves. This is where many of us suffer from weakness. We choose to believe that what we are able to ‘see’ is how the markets will behave. If there is one important lesson you need to master before you expose real money it is the willingness to accept you could be wrong, and knowing beforehand what you will do when you are proved wrong. You need to evaluate various scenarios, and determine which gives you the best risk-reward trade off. Then, you need to be patient for the markets to come to your desired level. And if it does come there, you need the courage to actually pull the trigger!! And finally, you need to be diligent to monitor the position to take corrective action if the market sends out fresh clues that are counter to your thinking. It is precisely because of these challenges that you need to be wary of trade ideas that come at you thick and fast from various sources, including TV channels. It is so easy to say ‘buy here with a stop there’ and not bother with that recommendation beyond that date. After all, there are new recommendations for you to look at the next day!! Anyway, I wish you good luck with your trading. This blog aims to teach you the methods, and nothing more.

Ramki of WaveTimes.com
http://www.wavetimes.com

Oct 092013
 

Elliott Wave analysis is one of the most versatile tools in the hands of a trader, provided he/she knows how to use it correctly. At WaveTimes you have the opportunity to learn more about the Elliott Waves.

Old timers know that my favorite formation is where we see an extended fifth wave. In fact, it has been a recurrent theme in WaveTimes that extended fifth waves can make you rich. You can do a search for that in the web and see the various examples given in this blog. I believe the concept has also been well covered in the book “Five Waves to Financial Freedom”. In today’s post, we will look at a popular index in the Indian markets known as Bank Nifty Index.And you guessed right, we will see another example of an extended fifth wave and what happened next. And importantly,these concepts will work in ANY well traded market, and even if you don’t have any interest in India’s BankNifty Index, I suggest you spend a few minutes to read and understand the Elliott Wave ideas enumerated below.

The way to start counting your waves is from a significant top or low. Let us start with the important top around 13,430 that was posted on May 20, 2013. I suggest that you right click each image and open it in a new tab.

Bank Nifty Index Wave 2

As you can see, the first sell off is labeled as wave 1 and we got a 50% correction of that as wave 2. The next wave down was the third wave, and this was followed by a ‘Flat’ correction as the fourth wave. This fourth wave was 38.2% of the third wave as shown in the Elliott Wave chart below.

Bank Nifty Index Wave 4

After the fourth wave was completed, the markets set off earnestly to the South and we got an extended fifth wave. As you know, a wave is known as an extended wave when its proportion is unusually long in relation to its counterparts in the cycle.

Computing Extended fifth wave in Bank Nifty Index

The extended fifth wave shown above has traveled 138.2% of the distance seen from the start of the first wave till the end of the third wave, i.e. from points 0 to 3.But what happened afterwards is most instructive. True to its form, once the extended fifth wave completed its own minor fifth wave, we got a massive bout of short covering, and the market raced back to the level of wave ii within the extended fifth wave. This is what I have taught you many times in this blog and in my book. Imagine how much you could have made by buying near the end of the extended fifth wave!

My next Elliott Wave chart shows how the rally evolved from the lows. The chart below shows that we got a second wave that came down by 70.7% of the first wave. As you probably remember, there is something known as ‘alternation’ in Elliott Waves. If wave 2 was a simple correction, we should expect wave 4 to be complex. Likewise, if wave 2 was a deep correction (as is the case here) we should anticipate the 4th wave to be shallow. These are all illustrated here for your benefit.

Wave 2 in Bank Nifty uptrend

And finally, could one have anticipated where the fifth wave will finish for teh rally from the bottom? Of course, yes! Remember what you read in “Five Waves to Financial Freedom”? We compute the target for the fifth waves by measuring the distance from 0 to 3 and then calculating some ratios. In the present case, the fifth wave finished exactly at the 61.8% measure of the that move. See the next chart for this.

Wave 5 in Bank Nifty uptrend

Well folks, that brings us to the end of this post. What you need to know is that it is possible to anticipate the terminal points of moves, and while there are no guarantees that it will work, you will have a chance of taking a low-risk trade at those points. Trading is all about taking sensible risks. This is what we should all be doing. I realize many of you still have difficulty in counting waves, but that is a challenge you will overcome with practice. Good luck.
Ramki
http://www.wavetimes.com/

Sep 292013
 

Hello Folks,

When I return from my holidays in the second week of October, I plan to spend more time on this blog. A lot of you have been requesting for more frequent updates, and I will try and squeeze some more time to continue to teach you how to use Elliott Waves. Take care until then. Ramki ( Sao Paulo)