Sep 132013
 

In this Elliott Wave Analysis of Kuala Lumpur Stock Index, you can see the challenges facing the trader who has to decide whether the index has completed a five wave move already, or perhaps it has just posted a third wave top, and we are currently in the fifth wave. Let us start by looking at the first Elliott Wave chart. Here, you can see my Elliott Wave labels marked out clearly. The fourth wave has corrected the third wave by exactly 38.2%.
KL Index fourth wave
Elliott Wave Analysis of Kuala Lumpur Stock Index by Ramki from WaveTimes.com

Even by looking at the proportion of wave 1 relative to wave 3, you can make out that the third wave had extended.The Wave Principle says that we should expect one of the waves to be extended, but it doesn’t rule out the possibility of two extensions in a five wave sequence. This is illustrated by looking at the next chart which zooms into the fifth wave. In the Elliott Wave count shown below for the fifth wave, you can see that there are two ways to count the waves.

KL Index extended fifth wave

The first count is to label the sub wave 3 as having finished just above the 1600 level, and assuming that we have posted an extended fifth wave at 1827. This is currently my preferred count. As you know from my book “Five Waves to Financial Freedom”, when a fifth wave is extended, we should expect two things to happen. First, there will be a swift correction, but second, and more important, is the possibility of a double retracement of the extended fifth. This means we could see a full retest of the highs, and occasionally even an overthrow to a new high, before another swift sell off. Perhaps this is what is happening now. Should this hypothesis be correct, we should be extra careful near 1835 levels. Be alert for a reversal there, and join in on any swift down move with a stop above the high posted. However, there is another possibility that I have indicated in the chart. This is we have only seen wave 3 finish at 1827, and we are currently in wave 5. You will then compute a 38.2% and a 61.8% of the distance from 0 to 3 to figure out where the 5th wave will finish.These come in at 1860 and 1980. I think there is a better chance for 1860 to cap the move, and so we can summarize by saying that the index will probably post its top between 1835 and 1860 and come off towards 1600. We shall see. Trading the markets of course is a completely different game. It requires you to be patient for the right moment, and for the risk-reward to be properly aligned before you risk real money. I try to implement this strategy at wavetimes.net. But this blog gives you the tools so you can try your hand at it yourself. Remember, picking a top or a bottom is a vanity that the trader needs to entertain with great judgment. It is often safer for the first down move to start and join in on the first pullback. All the best.

Ramki

Sep 122013
 

Hello Traders from the Middle East. So Dubai Stock index, or the DFM Index, has collapsed today, losing over 7%. Shocking, but the writing was on the wall all along. With the increase in rhetoric about Syria, we just needed a small push and it would have fallen over the cliff! When a move is approaching the end of its 5th wave, any informed investor would have sold off all his shares and waited for the inevitable correction to start. Elliott Wave Analysis of Dubai Stock Index shows that the 5th wave has indeed been completed. a fact that has become evident today, but something we should have anticipated. You can observe from the Elliott Wave charts attached that Dubai index had earlier seen an extended third wave. When you already have an extension in either the first wave or third wave, you should expect the fifth wave to be of normal proportions. Finally, by examining the sub waves of the fifth wave, you could have gotten out of most of your investments close to the top. This is shown in the last chart below. What is the outlook for Dubai Index from here? Well, there are mild supports at the fourth wave level within the just completed fifth wave.But expect any recovery to be mild and short lived. We should choose to exit on a pull back, waiting for the next bull market to be signaled by Elliott Waves sometime in the future.

Sep 122013
 

This post originally appeared on Wavetimes.com on 26August 2013 and has been restored after a crash of the database. Hence the date is shown differently above. My apologies to those who posted comments, as these have been lost too:

What is the outlook for BHEL? Has BHEL seen a significant low at 100.35? Should we buy BHEL on the next dip? What does Elliott Wave analysis suggest for BHEL? Let us start with a long term (weekly) chart of BHEL. Wave 5 that started around Rs 270 seems to have posted a 50% measure of the distance from 0 to 3.

BHEL28Aug13c

Next, let us look at the moves from 270 in detail. The first chart below shows that at 161.97, wave 3 was exactly 161.8% of wave 1. And the second chart of BHEL shows that we have already been to 78.6% of the distance from 0 to 3.

BHEL28Aug13a

BHEL28Aug13bOn top of that , we seem to have just exceeded a reflex point. Despite all this, the weekly chart looks quite bearish and we shouldn’t be surprised if the stock fails to overcome the 140 levels, and to attempt another test of the recent lows.

Next, take a look at another Elliott Wave count for BHEL, shown in the chart below.

BHEL28Aug13d

This chart would suggest that we have just finished a 3rd wave, and a complex fourth wave is likely to be seen. A complex correction could take many forms, and one of the most common corrections is a ‘flat’ correction where wave B reaches or exceeds the starting point of wave A. So, if you see a failure around 140, that could well be a trigger for a retest of the lows. It might be a good idea to consider buying some BHEL near there for the medium term. We will revisit the charts when it gets there, just to make sure that the decline has the personality of a B wave. Will someone please send me a reminder at that time.

 

Sep 122013
 

This post originally appeared on Wavetimes.com on 24 August 2013 and has been restored after a crash of the database. Hence the date is shown differently above. My apologies to those who posted comments, as these have been lost too:

Well, are happy days here again for MSFT investors? Steve Ballmer has finally decided to hang up his boots and MSFT stock surged. Is this a relief rally, or is it a new uptrend? It is too soon to tell, but as Elliott Wave traders, we will keep an eye on the $35.46 level. At that level, we have a confluence of two Fobonacci projections. The first is a 200% projection for what could be either a 3rd wave rally, or a C wave. In order to see if that level can be assigned some more confidence, one can take a look at the sub-waves of the 3rd wave (or C wave, if you will). This wave should have 5 mini waves, and one would expect that the internal relationship will likely follow the typical Elliott Wave ratios.And sure enough, exactly at 35.46 we can arrive at ONE possible end point for the 5th mini wave of the latest rally. When we see two levels coinciding, we should be extra alert for at least a reaction. For the day trader, a reaction is all one needs. After all, his trading horizon is but only a few hours! Here are the Elliott Wave charts. Enjoy!

MSFT24Auga

MSFT24Augb

Jul 132013
 

Elliott Wave Analysis can be applied on any well traded market, and that includes the Karachi Stock Index. There are two main indices in Pakistan. One is the KSE30, which I believe comprises of the leading shares. The broader KSE100 index is defined by Wikipedia as follows: Karachi Stock Exchange 100 Index (KSE-100 Index) is a stock index acting as a benchmark to compare prices on the Karachi Stock Exchange (KSE) over a period. In determining representative compaines to compute the index on, companies with the highest market capitalization are selected. However, to ensure full market representation, the company with the highest market capitalization from each sector is also included.

In today’s Elliott Wave update, I am presenting you with the analysis of the KSE100 index. As always, a picture is worth a thousand words. Pertinent Elliott wave comments and wave counts are given on the Elliott Wave chart itself. Remember an important lesson that I have oft repeated in these posts, as well as in my replies to many comments., any analysis is the first step towards making sensible trading decisions. Before you actually risk real money in the markets, you should wait for the right kind of set up that increases the odds for your success significantly. Elliott Waves give you the tools to do that. All the best.

Karachi Stock Index KSE100

Karachi Stock Index KSE100

Jul 032013
 

Hello Traders from India. I know you have all been patiently waiting for some indication about your famous NIFTY index. This post will attempt to give you an idea of my current thinking. As you all know, I am not offering any trading advice on this blog. Members of the exclusive club get to see how I would actually trade using Elliott Waves. However, there is enough material here for you to do your own thinking. Good luck!

Jun 192013
 

Hello Traders, In this Elliott Wave update, I am presenting you with a trade idea that was shared with the members of the exclusive club about 10 weeks ago ( April 4 to be precise). That trade idea was to invest in Reliance Communication and I am happy to note that today the stock has returned 100% profits to those who have held it in their portfolio. The reason for posting it in this blog is solely to demonstrate how one should go about using Elliott Waves. This blog seeks to teach you that. Enjoy.
4 April 2013 Many of you have been following my recommendation on Reliance Communication on my blog. The recent news about the rapprochement between the Ambani brothers augurs well for this stock, and the technical picture supports this view. Take a look! Good luck.

8 April 2013 I wonder if you have read my book “Five Waves To Financial Freedom”. In one of the chapters there, I have described a common scenario where a trader waits patiently for a 2nd wave and buys a stock. It starts moving in his favor, and he watches rubbing his hands with delight. But quite suddenly, something happens, and the stock starts coming off, this time it breaks below his purchase price. Our trader’s mood swings from joy to despair. He cannot bear to see his paper profit all vanish, and now he sees a paper loss. Of course, his original stop loss is still far away, but that is a different thing. In his mind, all that matters is he has lost all profits that he could have made, and now he has the compulsive urge to cut his loss before it runs away. So he either immediately gets out, or he gets out as soon as he sees a break-even price. After a few sessions, the stock roars higher, leaving him in the dust. Our trader tells anyone who would listen, including his wife, friends and his cat/dog that he was long at the right level, but was shaken off by the stupid market. I am narrating this story because you should not make the same mistake. We had 2 buy levels for RCOM. The first one was done, but if it dips again to the second level, you should still consider buying there. Don’t rush to sell! If your stop loss is done, well, that is the price of trading the market. You cannot hope to trade without expecting to lose some trades. But if you sit on your hands for most trades, and get into one when you feel you cannot wait any longer, then that is the trade that will most likely result in a loss! Be consistent, trade amounts that wont bother you too much if it results in a loss. *But trade a size that makes sense*. You cannot invest Rs 10,000 in a trade, pay me $50, pay the brokerage etc and still hope to make money. This is why I had said that members of this exclusive club are not meant to be small traders. You should know what is the correct position size for any trade. This size depends on your individual financial situation. You should know already that money is there in the markets for the intelligent trader. Take all trades, and over time you will see your bottom line is growing nicely. Good luck.

Jun 092013
 

Hello Traders, Its been a few weeks since I updated this blog. Incidentally, I had not suggested any trade to the members of the Exclusive Club also for quite a while (if you leave out the trade on an Indian Stock that reached within a whisker of its profit objective). There is no need to be super active in order to make money! The best trades are those where you know the odds of success are stacked in your favor. I try to be patient for those set ups. Last Thursday, I spotted such an opportunity in USDYEN and I am happy to share parts of that with you. You can see from what follows below that trading is a completely different game from doing analysis. Regular readers of my blog (and my responses to comments) would know that I have always maintained that the Raison d’être for any analysis should be to make money, not to showcase one’s ability to come up with fancy charts! A key advantage that I enjoy is my knowledge that the markets can do whatever it wants, no matter how clever I try to be! Armed with that knowledge, I can sidestep some of the traps that snare most traders. This is not to say that I haven’t experienced any losses. It is just that these losses are less frequent and usually quite small compared to the winning trades. What follows is how I began my trade idea. 6 June 2013 I started preparing for this update when the USDYEN was at 98.52 around 6.30pm my time. Around 6.50, my wife reminded me that I have to go for my walk. The Yen was trading at 98.09 by then. You can see the last prices on the 3 charts. About 40 minutes later, it was already below 96! Such is the power of a C wave or a 3rd wave. You CANNOT afford to stand in its path. Of course, you could have positioned short, but that is ‘what could have been’ not what we need to do from now. Anyway, the key lesson for you is when a 3rd wave or C wave is developing, NEVER, NEVER try and pick obvious supports to go against that move. Now for the trade idea. By the time I am writing this, the USDYEN has bounced back to 97.23. In case it stops around 97.30 and starts coming off, there is a reasonably good chance to retest the 95.95 low, and possibly break it to reach 95.60. I suggest that you be patient for that move to happen. Place a small buy order at 95.82 and add some more at 95.62. Your stop can be placed at 95.40, risking some 30 pips. You are looking for a move back to 97.30 at least.

A little later I added an update that suggested that while we were waiting for the dip to our supports, we might head higher and if we see 97.65, we can actually sell there with a stop at 97.80. The USDYEN went only as high as 97.49 and from there it collapsed to a low of 95.53. We were now long of USDYEN. The recovery from there went to a high of 97.24, but I sent out an alert that we should take profits on part of the position at 97.05. Later on, when the USDYEN was around 96.70, I once again warned traders that we should get out of all remaining longs because the wave structure indicated another sell-off was ready to happen.The USDYEN subsequently declined to a new low of 95.02 before rallying strongly again. The key take away for you should be the following. Elliott Wave analysis is a great tool for traders. But you will be better off if you realize that it requires a lot more than an ability to compute Fibonacci ratios in order to make money at the market. All the best.