Learn to Label Elliott Waves More Accurately

Learn to Label Elliott Waves More Accurately  

EWI Senior Analyst Jeffrey Kennedy shows you how to use momentum patterns to confirm your count

By Elliott Wave International

Are you looking for an easy way to improve your confidence as you analyze the charts you trade? Take a quick look at this chart (adapted from Jeffrey Kennedy's December 26 Elliott Wave Junctures lesson) to see how divergence relationships help clarify your analysis.

According to Jeffrey, divergence relationships are easy to identify. Whenever prices make a new extreme, look for underlying indicators to move in the opposite direction. Specifically,

The momentum relationship most often seen in waves 3 and 5 is divergence. Bullish divergence forms when prices make a new low while an accompanying indicator does not. Conversely, bearish divergence occurs when prices register a new high while an accompanying indicator does not. Bullish and bearish divergences are common to waves A and C, just as they are waves 3 and 5.

Notice the bearish divergence between waves 3 and 5 in the daily price chart of Halliburton Company (HAL) -- Prices reach a new high, yet the MACD indicator moves in the opposite direction:



Jeffrey notes that if you label an advance as a 5th wave move, and yet you do not see momentum divergence, that tends to argue for an extended 5th wave.

Next, at waves A and C, you can see an example of bullish divergence. Wave A bottomed at $32.90 in HAL and wave C ended much lower at $29.83. The histogram readings that correspond to waves A and C are -36.26 and -26.60, respectively.

Here's another example of divergence between waves A and C in Akamai Technologies (AKAM).



Notice that wave C is lower in price than wave A. However, if you look at the MACD histogram, you'll see that it registered a higher reading in wave C than it did in wave A, thus giving us a bullish divergence.

Understanding that Elliott waves demonstrate unique momentum relationships as well as price structure allows you to label waves more accurately and with greater confidence.

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Learn to Use Technical Indicators to Improve Your Trading and Analysis This is merely one chart example of how you can use technical indicators to strengthen your analysis. You can also learn about Moving Averages, one of Jeffrey Kennedy's favorite indicators, in a  Free 10-page eBook from Elliott Wave International. Moving averages are one of the most widely-used methods of technical analysis because they are simple to use, and they work. Now you can learn how to apply them to your trading and investing in this free 10-page eBook. Learn step-by-step how moving averages can help you find high-confidence trading opportunities. Improve your trading and investing with Moving Averages! Download Your Free eBook Now >>

Happy New Year!!

 

Ring in the New Year in Pips!

 

 Happy 2013 from your friends at ForexJourney

 

 

Chart Example - How to Identify High Confidence Reversal Zones

Chart Example - How to Identify High Confidence Reversal Zones Senior Analyst Jeffrey Kennedy shows you to how to use 3 technical tools to find price reversals

By Elliott Wave International

"Price gaps, wave relationships and Fibonacci retracements act as support or resistance for countertrend price moves. When combined, these characteristics help identify high-probability reversal zones."

-Jeffrey Kennedy

Technical analysis offers several ways to spot pullbacks that indicate a reversal of the larger trend. When you use the Elliott Wave Principle, it can be very useful to "gain a consensus" from more than one indicator to spot a high-confidence trading opportunity.

The following lesson is adapted from Jeffrey Kennedy's December 11 Elliott Wave Junctures educational subscription service:

Identifying high-probability reversal zones is simple, IF you know what to look for.

• Price gaps occur when the range of a price bar does not include the range of the previous bar. It acts as a reliable level of support and resistance for subsequent price action and should always be monitored.
• Elliott wave relationships help identify a range that will lead to the resumption of the larger trend. The most common relationship between waves C and A of zigzags and flats is equality, the second being a 1.382 multiple.
• Fibonacci retracements: Fourth waves tend to encounter Fibonacci support/resistance at a .382 multiple of wave three. Depending on the depth and duration of the correction, prices may also test the .500 and .618 retracements.

In the daily chart for Akami Tech Inc. (AKAM), you can identify all 3 characteristics:

• Price gap at 34.69
• Elliott wave relationship of 1.382 between waves C and A of a zigzag pattern at $33.79
• Fibonacci retracement at 50% of the prior advance at $34.04.

Using this information, you can see the very tight zone in which you may locate a probable reversal in this market (within the red circle).




Rather than focus on a single indicator, Jeffrey encourages you to combine them together to better identify high-confidence reversal zones in your price charts.

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Learn About Moving Averages, One of Jeffrey Kennedy's Favorite Indicators, in this Free 10-page eBook from Elliott Wave International Moving averages are one of the most widely-used methods of technical analysis because they are simple to use, and they work. Now you can learn how to apply them to your trading and investing in this free 10-page eBook. Learn step-by-step how moving averages can help you find high-confidence trading opportunities. Improve your trading and investing with Moving Averages! Download Your Free eBook Now >>

Two Signs That Deflation is Far From Over

Two Signs That Deflation is Far From Over
 
A key economic index turns south
By Elliott Wave International

The Producer Price Index decline is happening in tandem with a notable reversal in consumer sentiment. The Federal Reserve's machinations -- which includes the Dec. 12 announcement of $45-billion in monthly Treasury bond purchases -- will not stave off a developing deflationary trend. How much farther does the economic cycle have to go before it reaches the bottom? Read more.

Don't Expect the News to Tell You Where EUR/USD Is Going Next

Don't Expect the News to Tell You Where EUR/USD Is Going Next Retrospective explanations of market moves don't keep you ahead of the trend

By Elliott Wave International

On December 27, EUR/USD shot up as high as $1.3283. Forex news headlines were quick to comment:

"Dec 27 - The euro slightly extended gains against the dollar after strong U.S. new home sales data last month further lifted the market's appetite for riskier currencies."

But after EUR/USD hit that high, it promptly reversed and fell back down to the $1.3200 level, where it had been stuck all week.

You may ask: What happened to that "appetite for riskier currencies"?
Good question, and here's the answer: That explanation came after the EUR/USD rally, not before.

See, it's easy to fit the news to market action after the fact: Just grab the news story that best "explains" the move. But retrospective explanations don't keep you ahead of the trend. To win in forex, you need forward-looking analysis, and you need it before the market moves.

On December 26, the editor EWI's forex-focused Currency Specialty Service, Jim Martens, posted this comment on his Twitter feed:

EWI Forex Insider: @FX_ElliottWave
Now that we got the EUR rise we expected, the double zigzag rise from 1.3158 to 1.3256 leaves EUR/USD vulnerable to a decline.

Then, on the morning of December 27, Jim updated his Currency Specialty Service subscribers via this intraday forecast (excerpt):

EURUSD (Intraday) Posted On: Dec 27 2012 10:01AM ET / Dec 27 2012 3:01PM GMT Last Price: 1.3269

The overlapping rise and possible double top near 1.3309 could lead to a larger correction. A flat or triangle would lead to weakness...

And here's the decline EUR/USD saw shortly after:



Note that neither of these two forecasts mentioned the news. And for good reason: The December 27 euro-bullish news would have had you buying EUR/USD all the way into the top.
Instead of the news, we at EWI look at objective Elliott wave chart patterns. That, and not the news, is what helps us to forecast the markets before they move.

We don't always succeed. However, as you can tell from this example, our Currency Specialty Service delivers true forward-looking analysis. Get our forecast for the U.S. dollar plus 5 hidden market opportunities for 2013 in a brand-new FREE report >>

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Free Report: 5 Hidden Market Opportunities for 2013 In this special 21-minute video report, EWI Senior Currency Strategist Jim Martens looks past the obvious -- the "fiscal cliff," the Fed, etc. -- to give you a U.S. dollar forecast for 2013 that would astonish the mainstream experts. Jim then walks you through 5 precise Elliott wave "roadmaps" for 5 key FX market opportunities in the year ahead. BONUS: You also get Jim's new 5-minute video update featuring 2 major currency pairs. All you need to access this video report is a FREE Club EWI profile. Complete your free Club EWI profile now and get instant access to these special videos >> Club EWI is the world's largest Elliott wave community with more than 325,000 members. Membership is 100% free and includes free reports, tutorials, videos, special events, promotional offers and access to the valuable EWI Q&A Message Board.

Prechter: "This is Not a Picture of a Bull Market"  

The three-and-a-half-year rally has occurred on declining volume December 14, 2012

By Elliott Wave International

What a comeback for the Dow Industrials!

From a March 9, 2009, close of 6,547, the senior index climbed to 13,610 on Oct. 5, 2012.
Moreover, the Dow achieved this feat in the face of a weak-kneed economy, and it has grinded forward now for three and a half years.

The persistent rise has emboldened stock market prognosticators.

S&P Could Still Hit 1,600 Year-End
                            --CNBC, Oct. 23

All the while, fewer and fewer investors have been participating in the so-called recovery.
Take a look at the chart below from the just-published October 2012 special video Elliott Wave Theorist, and then read Prechter's commentary.

People have started ignoring volume because bears have been talking about declining volume ever since 2010. But it is extremely important. Volume overall has been shrinking ever since the market's low of March 2009. This line that I've drawn tracks the volume on the rising portions of the rally from 2009. Every time the market gets hit very hard-such as in the collapse of 2008, the "flash crash" of May 2010 and the market plunge in August last year-volume picks up.
This is not a picture of a bull market. In a bull market, the opposite happens. Volume should be going up during the entire period, and it should be declining every time the market corrects. But we're getting exactly the opposite situation.

--The Elliott Wave Theorist, October 2012

Volume is an important momentum indicator that many overlook. It's time to start looking at your investments independently. EWI is here to help.

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(Video) Alcoa and Aluminum: Latest Price Action Suggests 2 Major Opportunities

(Video) Alcoa and Aluminum: Latest Price Action Suggests 2 Major Opportunities
Alcoa (NYSE:AA) and aluminum futures prices have "come into critical price areas."
November 30, 2012

By Elliott Wave International

The editor of Elliott Wave International's Metals Specialty Service, Mike Drakulich, has just recorded a new, free video forecast:

"Aluminum and Alcoa: Exciting Juncture (Nov. 29, 2012.)"

Says Mike (excerpt):

"This is the first video of what is going to be a series of videos on the industrial metals markets, as they come into critical price areas that may tell us the big [moves] I've been talking about in my daily analysis are getting underway -- or, in fact, are underway."

ALUMINUM: The video starts off by showing you "the big picture from 2008-2009 bottom." Mike Drakulich walks you through the Elliott wave pattern since then and shows you how, off the recent high, the price has come down in a familiar ABC pattern. Moreover, the decline has retraced 62% of the previous rally -- a key Elliott wave signature and important Fibonacci proportion.

Here is an abridged version of the aluminum chart from the new video:



What's more, the price action in aluminum has just penetrated two key moving averages, the 50-day and the 200-day.

ALCOA (NYSE:AA): The second half of the video gives you a detailed look at Alcoa stock. Mike shows you that, going back to the same 2008-2009 period, AA has followed the price of aluminum very closely. You get a detailed view of Alcoa's recent drop below a key support price level, plus the analysis of an important trendline the stock has been "flirting" with -- which, if broken, should "open the gates" to a rare opportunity.
Mike Drakulich ends the video by saying:

"Bottom line, we have some really nice action in aluminum and Alcoa, and this is being seen across the board in many of the industrial commodities."

Visit Elliott Wave International to watch the full, FREE video forecast on these two emerging trading opportunities.