Elliott wave analysis

transcript

Investment InsightsInvestment Insights

Elliott Wave Analysis

StockStream LLP

All about investments. © StockStream LLP

Disclaimer

• Trading carries significant risk of losses and may not be suitable for all investors. Traders should assess these risks either themselves or in consultation with a financial advisor before investing.

• There is no guarantee that the trading techniques, methods and other information in this presentation will result in profits. The content in this presentation in only intended for educational and informational purposes and not intended as trading recommendation.

• The content of this presentation is subject to change without notice.

• Stockstream Financial Advisory Services LLP or mystockstream.com will not take any liability or accountability of losses arising from the use of information in this presentation in any manner.

- 3 -- 3 -All about investments. © StockStream LLP

StockStream Education Model

Introduction

• This concept was proposed by Ralph Elliott Nelson.

• Proposes that markets move in predefined patterns.

• Elliott Waves consist of impulse waves and corrective waves

• Impulse waves consists of 5 sub-waves and move in the direction of the trend.

• Corrective waves have three sub-waves and move against the direction of the trend.

Elliott Wave Pattern

• The basic wave pattern consists of an impulse wave and a corrective wave.

• Impulse waves consist of 5 waves (Wave-1 to Wave-5) and moves in the direction of the trend.

• Waves 1, 3 and 5 move in the direction of the trend while Waves-2 and 4 move opposite to the trend.

• Corrective waves can be simple or complex.

• A simple correction consists of 3 waves (Wave-A, B and C) which retrace a portion of the impulse wave

Impulse Waves

• A wave which moves in the direction of the trend is called a impulse wave.

• Waves 1, 3, 5 in an impulse wave.

• Impulse waves can be subdivided into 5 waves

Impulse Waves

• Following guidelines can be used to determine if a wave is impulse,

o Wave 2 should not retrace Wave 1 completely.

o Wave 4 should not retrace Wave 3 completely.

o Wave 4 should not go below the top of Wave 1.

o Top of Wave 3 should be higher than the top of Wave 1.

o Wave 3 is generally the longest amongst Waves 1, 3 and 5.

o Wave 3 is never the shortest amongst Waves 1,3 and 5.

Extension

• Extensions are elongated impulse waves.

• Wave 3 is most likely to show an extension pattern.

• Any of Waves 1, 3 and 5 can show an extension pattern.

• Extensions generally occur in only one of Waves 1,3 or 5

Truncation

• A truncation pattern is formed when the Wave 5 is not able to break above the highs of Wave 3.

• Generally happen following a strong Wave 3

Ending Diagonal

• These are generally formed as Wave 5.

• These indicate exhaustion of the prevailing trend.

• These are generally formed after sharp moves.

• A rising ending diagonal in an uptrend is a very bearish signal and leads to a sharp reversal.

Corrections

• Corrective waves move against the broader trend.

• Corrections can be simple or complex.

• Corrections are never in 5 waves.

• Common corrective patterns areo Zigzagso Flatso Triangleso Complex Corrections: Can be combinations of the above

patterns. Example, a double Zigzag or Flat and Triangle joined by a X wave, etc

Zigzags

• Three wave corrective pattern.

• The top of wave B is lower than the beginning of Wave A. Bottom of Wave C is lower than Bottom of Wave A.

• Wave A and C can be divided into 5 sub waves. Wave B can be divided into 3 waves.

• Complex corrections can take the form of double or triple zigzags joined by X waves.

• This is a 3 Wave corrective pattern.

• Wave B ends close to the beginning of Wave A and Wave C ends close to the end of Wave A.

• Waves A and B are in 3 waves. Wave C is in 5 waves.

• Complex corrections can take the form of double or triple flats or combinations of flats and other corrective patterns joined by X waves.

Triangles

• Triangles are consolidation patterns which consist of 5 waves.

• Each of the 5 waves can be subdivided into 3 sub waves.

• Complex corrections may be a combination of triangles and other corrective patterns joined by X waves.

Elliott Wave Example

• The example shows a 5 wave move higher followed by a 3 wave corrective decline.

• At this stage the market may move higher in another impulse wave or a complex correction may take place.

Questions

• Visit and register at mystockstream.com

• Follow and interact with StockStream Experts for answers• StockStream Education• StockStream Forex• StockStream Commodity• StockStream India