Natural Gas has become the subject of some discussion in recent days as some players are getting ready for a potential ‘third wave within a third wave’ kind of a move. Naturally, getting on board such a move will be very profitable, because ELLIOTT WAVE Principle tells us the third of the third will be the most powerful move. However, when I looked at the chart this morning, I get a different impression of the waves. Of course, I am writing these comments about 10 days after the analyst who first presented the world with the idea of the 3rd of third, and hence enjoy some degree of hindsight which he didn’t have. Just remember that what I am attempting here is to present a different view of the picture, and not in anyway denigrating the work of the other well respected analyst.
When I study the chart of Natural Gas, I see that we have completed an extended third wave at $3.55. The subsequent recovery went as a 4th wave to finish exactly at the 38.2% retracement level. The subsequent sideways movement could legitimately be considered as part of a complex flat, but adding my own spice to it makes it look like an expanding diagonal trainagle. Now Elliott Wave theory says that when a diagonal triangle occurs at the fifth wave position, its internal waves are made up of three legs each, and there should be five waves. From what I can see in the chart here is we have either finished, or are close to fnishing the third wave within the diagonal triangle. Thus, (ideally from near $3.61) we should get ready for a recovery, which is exactly the opposite direction of a ‘third of third’ scenario).
So you are wondering who is right? I suggest that you let the market be your guide. As explained in my book “Five Waves to Financial Freedom” a third wave has a certain personality, and surely a ‘Third of third” will have the most outstanding personality. If the subsequent move seems to be a fake, ie not have the personality of a third wave, you should conclude that the diagonal triangle approach is probably the more accurate one. Again, bear in mind that the goal of all analysis is to make money, and not to evaluate which count is better. You can use Elliott Wave analysis of Natural Gas to make lots of money, if you trade by observing all the rules and guidelines explained in any good book.
About ten days ago I posted an hourly chart of NYMEX Natural Gas, and suggested that perhaps we were unfolding in a diagonal triangle. I also went out of the way to suggest that it was unlikely that we were in the middle of a ‘third of a third’ wave because typically such a position would require a fast paced sell off. To put it mildly, that was two mistakes in one post! Prices have continued to edge lower, and the bearishness is only getting more pronounced. While there are still some valid arguments against the 3rd of 3rd count, in the spirit of what WaveTimes has long stood for, ie what matters is not your count, but whether you were right in the direction, I have to concede that I got it wrong this time.
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