Jul 312014
 

Many traders blindly trade without paying attention to the market clues that tie up with Elliott Wave. This article discusses some strategies.

This morning, I saw a news item that went as follows “South African telecom firm MTN is keen to enter the Indian shores. CNBC-TV18 learns from sources that MTN may go for a strategic acquisition route for its India entry. Interestingly, a lot of buzz was created on Twitter after Harsh Goenka, chairman of tyres-to-software conglomerate RPG Enterprises tweeted from his handle @hvgoenka: “MTN doing due diligence of a large Mumbai-based telecom company. Will this mega deal happen?” He, however, did not answer the subsequent questions from Twitteratti. Sources told CNBC-TV18 that MTN is open to picking up financial stake in existing Indian telecom player. They say MTN is in talks with three Indian telcos — Reliance Communications , Tata Teleservices and Idea Cellular . However, Goenka’s nudge could be towards the Anil Ambani-owned Reliance Communications that has twice in the past held talks and even agreed to part with majority stake for management control in one instance.

Read more at: Moneycontrol
So three companies are being mentioned and I looked at all of them, and decided to present some of the charts for you to learn from. As I have often been saying, this blog is to help you learn Elliott Waves. For those who are seeking trade ideas, the place to go is wavetimes.net, but again, that forum is meant for traders and investors who have serious money at risk, and for the experienced traders. If you are already a member of that exclusive club, be sure to add the email wavetimes.member @ gmail.com to your contact list as otherwise my trade ideas and notifications could land in your spam folder.

The following are only some of the charts relating to Idea Cellular Ltd because, of the three companies, I believe this stock is the most likely candidate, even though Mr Goenka thinks it is RCOM (I continue to own shares in RCOM from the time I discussed buying it here at wavetimes.com when it was less than half its current value)

The first chart shows the labels for the wave 1 to wave 4 of Idea Cellular Ltd. This exercise allows you to figure out where we are in the bigger picture for this stock. You can see that wave 3 was extended, having reached 223.6% of wave 1. I suggest right-clicking each image and opening it in a different tab!

Wave 1 to wave 4 of Idea Cellular Ltd

Wave 1 to wave 4 of Idea Cellular Ltd

Further examination reveals that wave 4 has come down by 38.2% of wave 3. You will also see the principle of alternation at work. As wave 2 was a simple correction, wave 4 became complex, in the form of an irregular correction.

Wave 2 was simple, so wave 4 was complex

Wave 4 was an irregular correction

Now that we have satisfied ourselves that wave 4 has been completed, and that we are in wave 5 for Idea Cellular Ltd, we can go about deciding the targets for wave 5. As explained in my book Five Waves to Financial Freedom and elsewhere in this blog, we can usually compute easily three possible targets for wave 5. This is shown in the following chart.

Fifth wave targets for Idea Cellular Ltd

Fifth wave targets for Idea Cellular Ltd

But many beginning traders and analysts fail to pay attention to other clues. For example, being aware of nearby resistances as shown below.

Nearby resistances for Idea Cellular Ltd

Nearby resistances for Idea Cellular Ltd

And finally, they also fail to take into account the possibility of being wrong. Even with 30 years of doing this stuff, I make allowances for errors, which is why the trades discussed in wavetimes.net are carefully chosen to give us the best chances for success. With Idea Cellular, despite the fact that there are certain additional clues that the MTN stake speculation is pointing in their direction, Elliott Wave analysis warns us to be aware of a different possibility.

Can this be a corrective ABC rally in Idea Cellular Ltd?

Can this be a corrective ABC rally in Idea Cellular Ltd?

Having examined the various sides of the picture, we can now decide whether we should buy, and if yes, where we should buy this stock. And more importantly, where we should place a stop loss. But you can do that yourself, given the vast amount of inputs shared with you over the last so many years on this blog.

Good luck.

Elliott Wave Theory Explained

Jul 032014
 

This Elliott Wave update on Alliant Energy Corporation is a sequel to the detailed analysis posted on 1st June 2014 in Wavetimes.com. Here is the link for that post: http://www.wavetimes.com/elliott-wave-analysis-of-alliant-energy-corporation-nyse-lnt/
For your convenience, I have also appended this new chart at the bottom of the older post as well. As most of you know, this blog is dedicated to all the traders and investors who seek to improve their financial market performance. I would like to call this a “Living Book”, an extension of Five Waves to Financial Freedom.

(Some of you might be interested to check out the other website, wavetimes.net which caters to professionals who have significant money at risk)

Elliott Wave Ending Diagonal

Elliott Wave Ending Diagonal

Elliott Wave Cycle Explained

Jun 152014
 

C.R.Bard, Inc designs, manufactures, packages, distributes and sell medical, surgical, diagnostic and patient care devices. Its market cap is $10.48 billion and the stock posted its 52-week high at $150.13 on April Fool’s day. Why are we looking at this stock? It is because it has the distinction of being the top loser on the S&P index yesterday! Elliot Wave analysis of C.R.Bard Inc shows some interesting patterns. As you know, Elliott Wave Principle holds that once a five wave move is completed in an upward direction, we should look out for a large move on the opposite direction. Elliott Wave analysts look for Fibonacci relationships between the various waves in order to validate their conclusions. If you take a look at the first chart below, we can see that wave 5 finished exactly at a 61.8% measure of the distance from the starting point 0 to the end of wave 3. This has been covered in detail in my Elliott Wave book “Five Waves to Financial Freedom”.

Elliott Wave Theory further holds that each of the three impulse waves that are seen in the broad five wave rally will have its own subset of five waves. You can clearly observe this phenomenon from the next Elliott Wave chart. Interestingly, you can see that not only the third wave is made up of five sub waves, but even the third wave within the third wave has its own minor five waves. Moreover, sub wave v inside the third wave finished exactly at a Fibonacci measure (50%) of the distance from 0 to iii.

The final chart shows how we can figure out some targets for the next leg of the large correction that is expected. We measure 138.2% of the distance traveled by the first move down and project that distance from the top of wave B. The target for the C wave is thus around 125.75. It is important to understand that no move will be a straight line move. However, generally speaking, C waves tend to travel fast and so anyone who is still nursing a long position is well advised to get out of that position on any recovery.

The charts and analyses posted in this blog are for educational purposes, and supplement what you learnt in my book FWTFF. I have another website, www.wavetimes.net which offers serious traders an opportunity to learn how to trade the market using my techniques.

————
27 June 2014 update.

A member asked about the internal waves of the C wave.Take a look at the chart below. We did not reach 125.75, but did manage to get to 135.80 after first recovering to 142.37. That was a decent enough move for most people. THe key point is when we have a trade, we need to watch how the market is moving. Elliott Waves is not a black box. When the minor 4th wave reached 142.37 and it started coming off, we have to get ready for the end of the move. I have explained in FWTFF how to compute these end points. One should lighten up the exposures starting from the earliest target. I use Elliott Waves to trade, not to make predictions. Sure, the target was 125.75, but if I wait indefinitely for that target to be reached even when new information is being presented, it will be an incorrect application of the wave principle. Enjoy.

End of 5 waves in CRBard

End of 5 waves in CRBard

Elliott Wave Rules Explained

Jun 102014
 

Elliott Wave analysis can be applied to any number of securities, be an individual stock or index or commodity, or just about anything that is traded in a liquid market. Today, we will take a look at the Elliott Wave analysis of Arabtec Holding Co. This us a popular stock that trades in the Dubai financial markets. In case you haven’t heard, Arabtec Holding Co. (ARTC) headed for its biggest three-day rout since March 2013 as some investors speculated Aabar Investments PJSC, its second-largest investor, is cutting its stake in the Dubai builder. To tell you the truth, I hadn’t heard the news either until AFTER I prepared the charts and mailed them to a friend who runs a large trading desk in Dubai.

The first chart below shows a couple of interesting things. For example, we have a failed 5th wave within the larger first wave. That was followed by a deep correction that went past the 50% retracement level.

Wave 2 of Arabtec

Wave 2 of Arabtec

We then got a fantastic rally was an extended third wave, which went to the 361.8% projection level of wave 1.

Wave 3 went to 361.8% projection of wave 1

Wave 3 went to 361.8% projection of wave 1

After an extended third wave, it is usual for wave 4 to come down to the 23.6% retracement level. This is what happened with Arabtec

Wave 4 down to 23.6%

Wave 4 down to 23.6%

We can anticipate the end of wave 5 by establishing relationship with wave 1. With Arabtec, it was 123.6% of wave 1.

Anticipating end of wave 5 in Arabtec

Anticipating end of wave 5 in Arabtec

If you are wondering how far the fifth wave went past the target, take a look here
Arabtec-5

And what happened at the end of a five wave move?
Arabtec-6

Arabtec probably has a little more ground to the downside, so we have to look at the near term charts to figure that out. I am sure you are now capable of doing that exercise. Go ahead, and give it a shot.

Jun 012014
 

Alliant Energy Corporation (NYSE: LNT) has been part of David Van Knapp’s Dividend Growth Portfolio since 2010. In his article in Seeking Alpha, David celebrates the 6th birthday of his portfolio and showcases the stocks that go into that portfolio. The first stock in the list of 18 stocks is Alliant Energy Corporation.

As most of you know, I look at stocks from an Elliott Wave perspective first, and so decided to do a detailed study of Alliant Energy Corporation. Elliott Wave analysis is a method that many professional investors embrace because it gives them several clues about where in the market’s progression we currently are. Briefly, Elliott Wave Analysis says that all impulse waves are made of 5 waves, and once a five wave movement is completed we should expect a correction.

Alliant Energy Corporation’s Elliott Wave charts reveal that we are in the fifth major wave higher, and within that fifth wave, we could potentially be in the fifth sub-wave. Usually, investors should start planning on a strategy to exit their holdings during this fifth-of-the-fifth wave. However, with Alliant Energy Corp the story is slightly different. The first and third waves that we have seen so far were both of normal proportions. Besides, the two corrections in wave 2 and wave 4 positions were both relatively brief. This leads one to anticipate an extended wave 5. So, we might as well be patient and wait for a move to around 60.50 before we take a fresh look at this stock. What follows are a set of 11 Elliott Wave charts of Alliant Energy. Study them carefully to see how the market seems to dance to the magic wand of Elliott Waves. Good luck. (I suggest you right click on each image and open in a new tab)

Alliant Energy Corporation -chart 1

Alliant Energy Corporation -chart 1

Alliant Energy Corporation -chart 2

Alliant Energy Corporation -chart 2

Alliant Energy Corporation -chart 3

Alliant Energy Corporation -chart 3

Alliant Energy Corporation -chart 4

Alliant Energy Corporation -chart 4

Alliant Energy Corporation -chart 5

Alliant Energy Corporation -chart 5

Alliant Energy Corporation -chart 6

Alliant Energy Corporation -chart 6

Alliant Energy Corporation -chart 7

Alliant Energy Corporation -chart 7

Alliant Energy Corporation -chart 8

Alliant Energy Corporation -chart 8

Alliant Energy Corporation -chart 9

Alliant Energy Corporation -chart 9

Alliant Energy Corporation -chart 11

Alliant Energy Corporation -chart 11

Date: 3 July 2014 Elliott Wave update for Alliant Energy Corporation
On 1st July, Alliant Energy Corp reached a high of 60.89 and today, just 2 days later, it is down at 58.25. WHat new clues are available? Take a look at this chart.

Elliott Wave update for Alliant Energy

Elliott Wave update for Alliant Energy

Apr 232014
 

In this post, I am going to present you with Elliott Wave analysis of Wockhardt Ltd. One of the members of my exclusive club had approached me for a consultation back in January 2014. It was the 14th of January, to be precise, and the stock was trading at Rs 413.65. The member sent me the following brief note:

“I consider myself as long term investor. I hope your advice/analysis will help in some of my long term investment decisions. By long term I mean I could hold for more than a year, if required.

Could you please look into the following stock for me: (I understand this will cost me 2 credits)
Market – India – NSE
Company – Wockhardt limited
Symbol – WOCKPHARMA
Exposure – None at this time.

Comment: This stock has comedown from around Rs. 2000 and currently trading at 420. It saw a low of 350 about 3 weeks back. Did it start its uptrend? Since the company is in pharma industry, it is subjected to lot of FDA regulations. I think FDA’s adverse observations made the stock to drop in recent times.”

I looked at the chart, and could make out that it was going to be a challenge to come up with a sound analysis. I prepared a set of 10 charts and will share with you some of them here. Please note that this is not a marketing message. The idea is to allow readers to see the value of Elliott Wave analysis, and how someone with experience with Elliott Waves could come up with a sound strategy. I recommend that you open the charts in different tabs.

Wockhardt Big Picture

Wockhardt Big Picture Elliott Waves

Wockhardt First Target for C wave

Wockhardt First Target for C wave

3rd wave target within the C wave

3rd wave target within the C wave

Verifying 4th wave as correct

Verifying 4th wave as correct

Identifying possible end of wave 5

Identifying possible end of wave 5

Analyzing minor waves of wave 5

Analyzing minor waves of wave 5

As can be seen from the above, I have finally come to the conclusion that a major correction is now over, and the rally that started off from that low is the first wave of a new cycle. Now comes the more interesting part, the one about where to buy.

Have we finished 5 waves of wave 1?

Have we finished 5 waves of wave 1?

WCKH-10-14Jan14

So we have identified a low-risk entry point. However, there were other considerations like risk-management and what size to expose. Yet, an initial entry point has been identified.

This member went long a decent position size at an average rate of 430. He probably purchased some on the way up after the dip, a smart investor I must say. He understood the size of the upcoming recovery, and wasn’t penny wise when it was the right time to take a risk. A majority of traders do the opposite. They take big risks when they should be cautious, and take small risks when everything points to a favorable move! Anyway, this is what happened. I am sharing with you just the plain chart without any notations. We got a dip down to below the 400 mark twice in the days that followed and the stock is up by nearly 70%.

The power of Elliott Waves

The power of Elliott Waves

Mar 102014
 

Today’s FT carries an interesting report filed by Miles Johnson, their Hedge Fund Correspondent. This report says that Seth Klarman, one of the most respected investors, has raised the alarm over a looming asset price bubble, and specifically mentions Tesla Motors , (TSLA:NSQ). He has warned of the potential for a brutal correction across financial markets. See this link: Seth Klarman warns of asset price bubble

So I decided to check out the charts for Tesla Motors to see if Elliott Waves could offer us additional clues that might help us play along with the view professed by Mr Klarman.

Take a look at the first chart below. It clearly shows that we are in the fifth wave of a move that stated back in Q3 of 2010. According to the Elliott Wave Principle, it is normal for one of the three impulse waves within a five wave sequence to be extended, i.e. for it to move a greater distance than the other two impulse waves. The chart below shows that the first and third waves were roughly equal is measure (i.e. they were of ‘normal’ proportions). This also ties in with another feature of Elliott’s observations that often enough, two impulse waves tend to be equal in dimensions. You will also observe the principle of alternation in the two corrective waves seen, whereby when wave 2 was shallow, we got a wave 4 that was deep.

The next chart shows how to anticipate a possible end point for wave 5. Because we are expecting wave 5 to be extended, one possible terminal point is at a place where wave 5 would have traveled a distance equal to that from point 0 to point 3. This comes at $295.

 

We will now zoom in to the fifth wave and see if the sub waves of the fifth wave can give us additional information. As you probably know, every impulse wave is composed of its own set of five sub waves. We can immediately see that sub wave (3) was extended to reach about 300% of sub wave (1). Wave (2) was 50% of wave (1) and wave (4) has already corrected to a 23.6% measure of wave (3). All these Fibonacci Ratios are common measures used by Elliott Wave Analysts to add confidence to their reading of the waves.

 

The final chart below uses the technique I have described in my book “Five Waves to Financial Freedom” where we measure the distance form point (0) to point (3) and compute a 38.2% and a 50% measure. These measures, when added to the bottom of wave (4) will give us potential targets for wave (5). Interestingly, if we add a 38.2% measure to wave (4) at 235, the target comes just below $295 which we already saw earlier. And should wave (4) come down some more to reach a 38.2% correction of wave (3) – that is reach $217, then we will get wave (5) to land at 291 if we add a 50% measure of (0) to (3).

Because of these confluences, we should go with the belief that there is a high probability for Tesla Motors to complete its extended fifth wave just below $295 and commence a very sharp decline that can take it all the way down to $137. This is the level where the extended fifth wave had its sub wave (2) end. There are numerous illustrations of this phenomenon explained in this blog as well as in my book so much so that I have often informed readers that fifth wave extensions can make us rich! Good luck and happy hunting.

Feb 112014
 

I had prepared the following article for publication in Seeking Alpha on Sunday, but I decided to share it here with you folks directly. Meanwhile Chevron Corp is already moving nicely.

Chevron Corporation is an integrated energy company with operations in countries located around the world. The company produces and transports crude oil and natural gas. Chevron also refines, markets, and distributes fuels as well as is involved in chemical operations, mining operations, power generation and energy services.

Let me be honest about one thing upfront. I don’t have a Dividend Growth Portfolio at the time of writing this article. I have been involved with the financial markets for over 30 years, and have always been in the thick of action in a variety of markets. But I neglected building a DGP. Yes, it is a serious lapse! But it is never too late to start. The goal is to reach an yield to cost of 10% within 10 years. Perhaps, Elliott Wave Analysis would help me reach that goal in a shorter time frame!

The stock had a closing price of $112.05 on Friday, 7th February 2014. If I were to buy this on Monday at $112, my own yield will be 3.59% which looks good. My Bloomberg screen shows that the 5-year Net Growth rate for dividends is 9.04% and the 3 year and 1 year dividend growth rates are respectively 11.15% and 11.11%. The P/E for the stock is 10.09. As many fundamental analysts have done adequate research on Chevron Corp and awarded it high marks, all I wanted to know before I placed my buy order was whether Elliott Wave Analysis offered me some additional clues. Is it time to add Chevron Corp to my brand new Dividend Growth Portfolio?
Let me give you a quick summary about Elliott Wave Principle. The theory was put forward by Ralph Nelson Elliott in the 1930s and has stood the test of time. Elliott discovered that all market moves in the direction of the main trend developed in a five wave pattern. Two of these five waves served to correct the first and third waves. But once the fifth wave completed, the next correction served to correct not only the fifth wave, but also the entire sequence for five waves. Hence that correction is usually bigger and lasts longer than the two minor corrections seen on the way up.
With that introduction, let us take a look at the first chart below. You can see that starting from the significant low posted in the early 1980s, Chevron Corp has a clear five wave move to its recent top. The third wave traveled a distance of 161.8% of the first wave, a classic measure for third wave moves. Some of you might recognize this ratio as a Fibonacci number. You will also notice that wave 4 and wave 2 were alternating in length and complexity. This too is as per Elliott Wave Principle.

Chevron Corp is in wave 5

Chevron Corp is in wave 5

I then zoomed in to view the fifth wave to see if that had its own five minor waves. And sure enough, I could make out a clear five wave pattern there too.

Elliott Wave Analysis of Chevron Corp

Elliott Wave Analysis of Chevron Corp

So does this mean we will now experience a decline that will be longer than wave 4 seen during the great recession of 2008? If that happens, won’t the price go down to around $79?
This is where one more important guideline from the Wave Principle will help us decide. According to the theory, we should expect at least one of the three impulse waves to extend, i.e. travel an unusually long distance. From the above two charts, it is evident that both waves 1 and 3 were of ‘normal’ proportions. Hence, it is likely that wave 5 will be extended. That means what we have seen in the second chart above is not the end of wave 5, but probably only the first sub-wave within an extended fifth wave. Seen from that angle, it would be very tempting for the investor who seeks dividend income to get a full exposure of his/her maximum position size that the portfolio would allow. It is true that we could still get a dip under $100, but that dip should be used to add some more exposure to CVX. I am going to buy my first lot on Monday, before the stock goes Ex-Dividend.

Jan 312014
 

There have been a few requests for publishing a record of the trades that the members of the Exclusive Club shared. The following is the complete list of the trades closed in January 2014. As you can see, I am very selective about the trades. The aim is to become rich slowly! WaveTimes is used by members as a supplement to their normal investment and trading activity. And because we are willing to be patient, we are successful most of the time. In January 2014 it was a 100% success rate.

Here is the link: http://tinyurl.com/WTJan2014