Dec 312013
 

As 2013 bows out and we welcome another New Year, I present you with some of the interesting stuff we looked at in the Exclusive Club in recent months. You might recall that I have already published some trades that went wrong. There is honesty, transparency and fair play in everything that we do. These charts below are just samples, by the way. In the real trades, I have shared as many as 36 charts in a recently closed NIFTY trade. We had our minor setbacks interspersed with trades that performed really well. If one uses Elliott Waves effectively, there are terrific rewards to be had. I usually tend to err on the side of caution, but those who got in at the levels I recommended for many asset classes and stuck with the original stops have had a fantastic run. Trading is all about taking a series of risks where the winning trades give you a very big cushion to handle the losing trades. Let us all look forward to a rewarding 2014, and I wish each and every one of you the very best of luck.

*Crompton Greaves (28 Nov 2013)*

“We are probably going to find some resistance between 129.40 and 130.80 and come off to between 117.80 and 121. The target is around 138.00. So we will look to buy the next dip.”

 

 

 

 

 

 

 

 

 

 

*Nike ( 8 October 2013)*

“Now this is what I am planning to do. Buy some near 70.50 and be willing to add at 69.00. Stops at 68.45, or risking $1.30. The minimum target is a retest of the recent highs above $75 so we will get a risk-reward trade off of at least 4 to 1.”

 

 

 

 

 

 

 

 

 

*Crude Oil ( 25 Nov 2013)*

The idea was to buy at 91.60 and the low was 91.77 from where it went all the way to above $100.”

 

 

 

 

 

 

 

 

 

 

 

 

*Launch of consulting service*

In addition to this free blog that aims to teach you how to use Elliott Waves, what many have come to know as the ‘living book’ that supplements ‘Five Waves to Financial Freedom’, I have been running the wavetimes.net website where members receive some of my low-risk trading ideas. However, there have been numerous requests for help with stocks and commodities that I don’t include in that website. I am delighted to say that these traders can now spend a full hour talking to me where we can go over up to two specific trades of their choice in detail. Check out this link: www.wavetimes.net/consulting

Dec 012013
 

After posting a significant low on 23 August 2013 at 100.15, BHEL uptrend has gathered steam and has closed above the weekly trend line resistance. Furthermore, it has closed ABOVE two recent tops. I had discussed the bullish possibilities for this stock in Elliott Wave Analysis of BHEL that was posted on 12th September in Wavetimes. Although the stock didn’t quite make it down to the preferred buy level, the directional clue given by Elliott Waves has proved correct. Let us now take a quick look at what key levels lie in the immediate vicinity.

The chart you see below has some tentative Elliott Wave counts posted on it. It is important for you to understand that at this stage it is too early to confirm what will happen in the big picture. One thing, though, is clear. The 3rd wave did not bear the personality that is normally associated with it. So there is still a chance that this will turn out to be a double zigzag. But we need not worry about it just now. Given the current momentum, we shouldn’t be surprised to see a visit to 166 plus levels where there are some Fibonacci confluence levels. A gradual move to that level will mean it is time to take profits there. On the other hand, if it explodes higher, the stock can end up compensating the slow performance in wave 3 by having a very strong 3rd wave within an extended 5th. I am mentioning all this because trading the market using Elliott Waves is different from posting a chart with the waves neatly shown after the move is over. We need to be aware of various possibilities, and have a clear cut strategy carved out in advance. In the meanwhile, I would like to consider buying a small amount on any dip to near 152.70 with a stop below 152. That is a small risk to capture a move to 166 and beyond. While we are trying to limit our risk here, the uptrend in BHEL will be called into question only if we trade below 144.65, which is the top of wave 1 inside the current 5th wave.

BHEL uptrend

Nov 182013
 

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.

EURUSD fails at the 61.8% Fibonacci retracement

The power of the 61.8% Fibonacci retracement


Wave C finishes at 161.8% projection

Wave C finishes at the 161.8% projection level

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.

A double zigzag correction in EURUSD

A double zigzag correction in EURUSD

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.

EURUSD in a feeble bounce before sell off

EURUSD in a feeble bounce before sell off

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!

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.