Home > Commodities
Commodities & Elliott Wave Analysis: Where Do You Start?
This is my latest interview with Jeffrey Kennedy, editor of Elliott Wave International's Futures Junctures Service, which brings you daily and longer-term opportunities in commodities.
Vadim Pokhlebkin: Jeffrey, I like how in your Daily Futures Junctures, you always remind subscribers of some of the basic points of Elliott wave analysis. Even your experienced subscribers must appreciate this feature. Let's talk about some basics today. Here I am, looking at chart of commodities, trying to find an Elliott wave pattern. What am I looking for?
Jeffrey Kennedy: You're looking for a basic Elliott wave sequence of five non-overlapping waves in the direction of the trend, and three overlapping waves against it.
VP: So, let's take an actual chart -- Coffee futures -- the market you are focusing on in tonight's Daily Futures Junctures. (May 11; online now. – Ed.) Here is an unlabeled version of the daily chart you show tonight -- how do I make sense of it?
JK: Well, again, remember, you're looking for five and three-wave moves. As you can see, from the March low of 106.60, Coffee is tracing out a three-wave advance; it's circled in red. Now, you can't see what Coffee has done prior to this chart, but if you did, you would see that at the March low, it finished a five-wave decline. What you can see is that the first leg of the advance subdivides into five waves and the second one -- into three. So, you can go ahead and label them A and B, the first two parts of an ABC correction. By definition, what comes next is wave C, and those are always five-wave moves. Now, within that last leg of the rally, can you count five internal waves?
VP: Not really... it's more like three, so far.
JK: Correct -- it's only showing three, so far, which means that wave C rally is not yet finished. Now, the Wave Principle teaches that the most common relationship between waves A and C is equality. But wave C is not yet done, so let's move on to the second most common proportion: 1.382, a Fibonacci ratio. That is, wave C equals 1.382 times the length of wave A... and there is your price target. Here's the same chart partially labeled:
VP: You know, it's starting to make sense now, once you put all the little pieces of the puzzle together.
JK: Sure does. I also show a 300-minunte Coffee chart in tonight's DFJ, where my subscribers can see the internal subdivisions of each wave much clearer. (May 11; online now. – Ed.)
VP: Thanks for another valuable lesson, Jeffrey.
JK: My pleasure!
Major Commodities, Daily & Monthly Opportunities – delivered to your screen via Jeffrey Kennedy's Futures Junctures Service. Try it risk-free for 30 days.