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Options Traders: Why "Ending Diagonals" Should Be Your New Best Friend
Elliott Wave Junctures' video lesson shows how an Elliott wave chart pattern called "ending diagonal" takes the guesswork out of options timing
By Nico Isaac
Tue, 15 May 2012 17:00:00 ET
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Here's an investing joke that never gets old:  

  • What's the difference between an options trader and a lion tamer?
  • Answer: a tie
Trading options is not for the faint of heart. The stakes are sky high. You're not just buying or selling a security. You're also doing so with the expectation that said security reach a specific price by a specific time.
 
That's why with options trading, most traditional forms of technical analysis fall short. At their best, they can identify WHAT the trend at hand is. Elliott wave analysis, however, goes the full distance by also showing you WHEN and WHERE that trend may end.
 
In the timeless April 4 Elliott Wave Junctures video trading lesson, EWI's senior analyst Jeffrey Kennedy reveals how a key timing guideline pertaining to one Elliott wave pattern in particular -- the ending diagonal -- makes it options traders' best friend. Here's a sneak preview of what this 5-minute video lesson teaches you:
 
First, Jeffrey pulls up a real-world example of an ending diagonal on the price chart of Union Pacific Corp (UNP) circa September-October 2011, alongside this useful checklist:
 
            "Ending diagonals are five-wave terminating patterns...
            "They have a very distinct wedge-like shape contained in converging trendlines...
"They can only form in the 5th wave position of an impulse move or the wave C position of an A-B-C structure..."           
 
 
 
Then, he lays the golden egg about options timing:
 
"An aspect of ending diagonals that not too many people are familiar with is its timing component. Whenever a diagonal ends, it is followed by a sharp volatile thrust to back beyond the origin of the pattern. This typically occurs within XX to XX the time it took the pattern to form."
 
In the final moments of this Elliott Wave Junctures video trading lesson, Jeffrey returns to the Union Pacific price chart to show you how an options trader could have used the ending diagonal timing guideline to make a highly rewarding timing call in UPN.
 
In Jeffrey's own words: "That is very, very important information for any time-sensitive investment."
 
So, what are you waiting for? Subscribe to Jeffrey Kennedy's new Elliott Wave Junctures service and get instant online access to the entire EWJ video library.
 
You get 20+ unique video trading lessons, including this April 4 "Ending Diagonal in Union Pacific" show stopper.
 
 

"The best way to learn how to spot Elliott wave opportunities is to find an experienced mentor to teach you using real-life examples. That's what Elliott Wave Junctures does, and Jeffrey Kennedy is one of the best teachers I know." - Robert Prechter

   
Let veteran Elliott wave analyst Jeffrey Kennedy be your trading mentor. 3-5 times per week, Jeffrey walks you through REAL market junctures with one overarching goal: to help you master the critical aspects of spotting and acting on high-probability trading opportunities in the markets you follow.

 
 
 

 

 

Tags: diagonal, Elliott wave, Elliott Wave trading, Jeffrey Kennedy, options trading, technical analysis
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The Elliott Wave Principle is a detailed description of how financial markets behave. The description reveals that mass psychology swings from pessimism to optimism and back in a natural sequence, creating specific Elliott wave patterns in price movements. Each pattern has implications regarding the position of the market within its overall progression, past, present and future. The purpose of Elliott Wave International’s market-oriented publications is to outline the progress of markets in terms of the Wave Principle and to educate interested parties in the successful application of the Wave Principle. While a course of conduct regarding investments can be formulated from such application of the Wave Principle, at no time will Elliott Wave International make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. Investing carries risk of losses, and trading futures or options is especially risky because these instruments are highly leveraged, and traders can lose more than their initial margin funds. Information provided by Elliott Wave International is expressed in good faith, but it is not guaranteed. The market service that never makes mistakes does not exist. Long-term success trading or investing in the markets demands recognition of the fact that error and uncertainty are part of any effort to assess future probabilities. Please ask your broker or your advisor to explain all risks to you before making any trading and investing decisions.