How Elliott Wave Analysis Answers "Where to Next?'

Home > Education
How Elliott Wave Analysis Answers "Where to Next?'
The July 3 Elliott Wave Junctures video lesson shows an Elliott zigzag pattern in real-time price charts of 3 major Forex markets

By Nico Isaac
Thu, 05 Jul 2012 17:30:00 ET

Get investable insights sent to your inbox at least once a week – for free. Challenge the way you think about investing with The EWI Independent.

Privacy

Let's say you have three financial analysts who employ three very different trading methods. Imagine showing them this chart of the Canada/US Dollar Index, and asking that they each use their particular method to forecast where prices will go next. Here's what they might say:

1 - Fundamental analyst: "We have to wait for a market-moving news event to break. A positive event should take prices up. A negative one should push prices down. Or, prices could 'shrug off' the news event entirely and move opposite to what we expect."

2 - Straight technical analyst: "My technical indicator of choice -- the Relative Strength Index -- suggests that upside momentum is waning; even so, it can't tell me WHEN or WHERE the rally will end."

3 - Elliott wave analyst: "I see a clear Elliott wave pattern unfolding in the chart. So I use the rules & guidelines that are relevant to that pattern to forecast the most probable end point for the rally."

The most useful and coherent choice for gauging where prices will go next is clear: No. 3, the Elliottician. And, in the July 3 Elliott Wave Junctures video, EWI's senior analyst Jeffrey Kennedy reveals exactly how, using this very USDCAD chart.

First Jeffrey identifies price action from the 2004 low to be unfolding as a "classic, textbook" Elliott zigzag pattern. This is a straightforward A-B-C move with a 5-3-5 substructure. He places the appropriate labels on the chart of the USDCAD below:

Jeffrey then walks his Elliott Wave Junctures subscribers through a careful checklist of do-or-die rules and guidelines pertaining to zigzags. These enable him to determine how much "elbowroom" the USDCAD rally actually has, such as:

2 of the 3 (A-B-C) waves "tend toward equality."
The most common relationship of wave C is a specific Fibonacci multiple of wave A.
Wave C often encounters resistence at the ______ line of the price channel.
When the slope of wave A is steep and fast, wave C will often be ______.
And, finally, zigzags are countertrend moves; therefore, once finished, they are retraced in 5-waves back to the origin of the move. (See the large decline that followed the completion of the zigzag)

All of these steps help identify the termination point of the final, wave C structure of the zigzag -- and so, the ideal point to position for a major move down. And that's no small potatoes!

Plus, in the second half of the July 3 Elliott Wave Junctures, Jeffrey provides 2 more examples of how a zigzag in the past price action of the Euro/US Dollar and Japanese Yen/Dollar paved the way for major moves.

So here's what to do:

Commit Jeffrey's 5-minute Elliott Wave Junctures video lesson on zigzags to memory.
Identify a zigzag on the price charts of the liquid finanical market of your choice.
Increase your odds of finding high-confidence trade setups before they occur.

Subscribe to Elliott Wave Junctures today to get stared.

Get Real-World Trading Lessons to Help You in Real-Life Trading Scenarios

“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.

Learn more about this first-of-its-kind service
and get a 30-day risk-free offer now >>

Tags: Elliott wave, elliott wave junctures, Elliott Wave trading, euro, forex, forex trading, Jeffrey Kennedy, U.S. dollar, usd/jpy

May 13-16

Las Vegas Money Show

July 10-13

Freedom Fest Conference

Most Read

Highest Rated

Education

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.