Elliot Wave counts
Daily
chart Wave counts:
Wave 1: Wave one is rarely obvious at its inception. When the first
wave of a new bull market begins, the fundamental news is almost universally
negative. The previous trend is considered still strongly in force. Fundamental
analysts continue to revise their earnings estimates lower; the economy
probably does not look strong. Sentiment surveys are decidedly bearish, put
options are in vogue, and implied volatility in the options market is
high. Volume might increase a bit as prices rise, but not by enough to alert
many technical analysts.
Wave 0, 1: 5285 –
6364
Wave 2: Wave two corrects wave one, but can never extend
beyond the starting point of wave one. Typically, the news is still bad. As
prices retest the prior low, bearish sentiment quickly builds, and "the
crowd" haughtily reminds all that the bear market is still deeply
ensconced. Still, some positive signs appear for those who are looking: volume
should be lower during wave two than during wave one, prices usually do not
retrace more than 61.8% (see Fibonacci section below) of the wave one gains,
and prices should fall in a three wave pattern.
Wave 1,2 : 6364 – 6001
Wave 3: Wave
three is usually the largest and most powerful wave in a trend (although some
research suggests that in commodity markets, wave five is the largest). The
news is now positive and fundamental analysts start to raise earnings
estimates. Prices rise quickly, corrections are short-lived and shallow. Anyone
looking to "get in on a pullback" will likely miss the boat. As wave
three starts, the news is probably still bearish, and most market players
remain negative; but by wave three's midpoint, "the crowd" will often
join the new bullish trend. Wave three often extends wave one by a ratio of 1.618:1.
Wave 2,3 : 6001 –
8174
Wave 4: Wave four is typically clearly corrective. Prices may
meander sideways for an extended period, and wave four typically retraces less
than 38.2% of wave three (see Fibonacci relationships below). Volume is well
below than that of wave three. This is a good place to buy a pull back if you
understand the potential ahead for wave 5. Still, fourth waves are often
frustrating because of their lack of progress in the larger trend.
Wave 3,4 : 8174 –
7748
Wave 5: Wave five is the final leg in the direction of
the dominant trend. The news is almost universally positive and everyone is
bullish. Unfortunately, this is when many average investors finally buy in,
right before the top. Volume is often lower in wave five than in wave three,
and many momentum indicators start to show divergences (prices reach a new high
but the indicators do not reach a new peak). At the end of a major bull market,
bears may very well be ridiculed (recall how forecasts for a top in the stock
market during 2000 were received).
Wave 4,5 : 7748 –
(8715-8863) ; Max extension (9188) if Put buying continues by retail traders.
Long-term Investors can look to buy near 7000 levels in
Nifty with sl under 6500
Long-term Wave counts targets above 6683 includes
6683, 7176, 7725, 8169, 8613, 9246, 10239, 11075, 12377 (WAVE 3 ends)
About Elliotwave:
Source:
Wikipedia
Five wave pattern (dominant trend)
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Three wave pattern (corrective trend)
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Wave 1: Wave
one is rarely obvious at its inception. When the first wave of a new bull
market begins, the fundamental news is almost universally negative. The
previous trend is considered still strongly in force. Fundamental analysts
continue to revise their earnings estimates lower; the economy probably does
not look strong. Sentiment surveys are decidedly bearish, put options are in
vogue, and implied volatility in the options market is
high. Volume might increase a bit as prices rise, but not by enough to alert
many technical analysts.
|
Wave A: Corrections
are typically harder to identify than impulse moves. In wave A of a bear
market, the fundamental news is usually still positive. Most analysts see the
drop as a correction in a still-active bull market. Some technical indicators
that accompany wave A include increased volume, rising implied volatility in the options
markets and possibly a turn higher in open interest in
related futures markets.
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|
Wave 2: Wave
two corrects wave one, but can never extend beyond the starting point of wave
one. Typically, the news is still bad. As prices retest the prior low,
bearish sentiment quickly builds, and "the crowd" haughtily reminds
all that the bear market is still deeply ensconced. Still, some positive
signs appear for those who are looking: volume should be lower during wave
two than during wave one, prices usually do not retrace more than 61.8% (see
Fibonacci section below) of the wave one gains, and prices should fall in a
three wave pattern.
|
Wave B: Prices
reverse higher, which many see as a resumption of the now long-gone bull
market. Those familiar with classical technical analysis may see the peak as
the right shoulder of a head and shoulders reversal pattern. The volume
during wave B should be lower than in wave A. By this point, fundamentals are
probably no longer improving, but they most likely have not yet turned
negative.
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Wave 3: Wave
three is usually the largest and most powerful wave in a trend (although some
research suggests that in commodity markets, wave five is the largest). The
news is now positive and fundamental analysts start to raise earnings
estimates. Prices rise quickly, corrections are short-lived and shallow.
Anyone looking to "get in on a pullback" will likely miss the boat.
As wave three starts, the news is probably still bearish, and most market
players remain negative; but by wave three's midpoint, "the crowd"
will often join the new bullish trend. Wave three often extends wave one by a
ratio of 1.618:1.
|
Wave C: Prices move
impulsively lower in five waves. Volume picks up, and by the third leg of
wave C, almost everyone realizes that a bear market is firmly entrenched.
Wave C is typically at least as large as wave A and often extends to 1.618
times wave A or beyond.
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Wave 4: Wave
four is typically clearly corrective. Prices may meander sideways for an
extended period, and wave four typically retraces less than 38.2% of wave
three (see Fibonacci relationships below). Volume is well below than that of
wave three. This is a good place to buy a pull back if you understand the
potential ahead for wave 5. Still, fourth waves are often frustrating because
of their lack of progress in the larger trend.
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Wave 5: Wave
five is the final leg in the direction of the dominant trend. The news is
almost universally positive and everyone is bullish. Unfortunately, this is
when many average investors finally buy in, right before the top. Volume is
often lower in wave five than in wave three, and many momentum indicators start
to show divergences (prices reach a new high but the indicators do not reach
a new peak). At the end of a major bull market, bears may very well be
ridiculed (recall how forecasts for a top in the stock market during 2000
were received).
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Elliott
wave rules and guidelines
A correct Elliott wave "count" must observe three
rules:
1.
Wave 2 never retraces
more than 100% of wave 1.
2.
Wave 3 cannot be the
shortest of the three impulse waves, namely waves 1, 3 and 5.
3.
Wave 4 does not
overlap with the price territory of wave 1, except in the rare case of a
diagonal triangle.
A common guideline observes that in a five-wave pattern, waves 2
and 4 will often take alternate forms; a sharp move in wave 2, for example,
will suggest a mild move in wave 4. Corrective wave patterns unfold in forms
known as zigzags, flats, or triangles. In turn these corrective patterns can
come together to form more complex corrections. Similarly, a triangular
corrective pattern is formed usually in wave 4 (very rarely in wave 2) and is
the indication of end of correction.
Disclaimer:-
Investments are subjected to market risks. Please consult your financial advisor before investing in the above mentioned stocks.
The views expressed in this blog is author's belief, it may or may not be right.
