Hi, these are just ideas not recommendations, sometimes I trade my ideas, sometimes I don’t.
Always remember, yours is the responsibility for your trades,
Good luck,

Sunday, July 24, 2011

A five wave Elliot pattern?

In this Dow Jones Chart and the accompanying table, let’s see if an identifiable Elliot wave pattern emerges.

Most of the times third waves are the extended ones, in our case wave III advanced the most, going from 11,934.58 to 12,719.49 for an impressive 6.58% gain in 8 trading days.
As wave I resulted in a 2.46% gain, the relationship between III and I is 6.58/2.46 or 2.67 times, very near the 2.618 Fibonacci number.

When wave III is extended, waves I and V tend towards equality, wave I with its 2.46% gain and wave V with 2.74% are very near correspondence, with only an 11% variation.

The golden section (0.618 – 0.382) is present in Elliot patterns.
When wave III is extended a textbook golden section forms in wave IV both in percent and in time. Wave 5 went from 11,897.27 at the start of I to 12,724.41 in our proposed end of wave V, for a 6.95% total gain in this movement. Now, the 0.618 part of this movement is a 4.30% advance from 0, resulting in a reading of 12,408.85.

12,408.85 is almost exactly our 12,385.16 level for fourth wave, also the 0.618 part of the 25 trading days is 15 days, the amount of time from 0 to the top of wave III.

They say chartists are guilty of seeing formations and patterns anyway they look at a chart and this could be no exception to that, patterns are easily identifiable after they end, that’s what makes speculating in stocks a very difficult art.

The following weeks will shed light about our proposed model; in the meantime my advice is extreme care with your long positions.

Saturday, July 2, 2011

Elliot .......Anyone?

Wave (A) went from 12810.54 to 11897.27 totaling 913.27 units down, wave (B) length as of Friday’s close is 685.5, resulting on a 75% retrace of wave (A). If this is really a zigzag correction (because of the 5-3 A-B), the end of wave (B) must be near.

Let’s review the zigzag rules and guidelines:
Wave (A) always subdivides into an impulse or leading diagonal. PASS
Wave (B) always subdivides into a zigzag, triangle or combination. PASS
If wave (B) if a zigzag it will retrace 50 to 79% of wave (A). PASS as of Friday 07/01.
In a zigzag the top of (B) is lower than the start of (A). PASS as of Friday 07/01

The breaking of the 2-4 uptrend line warns us of a change of pace, also the S&P bullish percentages are in bear mode.

Sentiment: The 5% - five day gain of the DOW looks like a bull trap. Start looking for shorts or at least be very careful in your long positions. Parabolic SAR of your holdings or momentum should give ample warning.


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From the Dominican Republic - Swing Trader Speculator - Civil Engineer/Project Manager - sternloinaz@gmail.com