Market Report: Using Elliott Wave on Stocks

By: Nouf | Sun, Dec 2, 2012
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Many Elliotticians and traders feel that you can't use Elliott Wave on individual stocks and that it's only for selective markets. I actually disagree with that statement; Elliott Wave can be used on a number of markets providing you have good volume and a number of participants to make up the collective opinion needed to move price around to creative the waves.

Now I will say that a penny stock is hardly likely to get the attention of big hedge funds, but large stocks such as AAPL, IBM, GOOG etc are big stocks that have a lot of shares and big volume, those are the stocks where Elliott Wave can be applied.

Here are some examples I would like to share.


Intel (INTC)

Intel
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Back in July 2012 I was looking for a high to end what I thought was a 3 wave advance from the March 2009 lows. The setup was as good as it gets with regards to controlled risk, it had a clear price invalidation level at the wave 2 high, and with such a small risk level the risk/reward was greatly in favor of a big move lower, seeing as we had a potential large 3 wave advance into a measured move target from the March 2009 lows.

The target was a move back under $12, and it seemed a brave call to make with its trading near $25.

Lets fast forward shall we.

Intel
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We can clearly see that this stock has literally collapsed, and a hedge fund favorite as well, in case you missed it I never once referred to looking for any news as to why this declined the way it did. I simply trusted the patterns that were potentially being setup, I could not tell you the reasons why this stock has declined and frankly that does not interest me.

As mentioned, traders buy and sell and create the waves that I count, it makes no difference to what the news was, as all I was interested in was price action to support or negate my ideas.

I think INTC has far lower to come and that initial $12 stock is not looking to outrageous now is it?

A great example of a low risk/high reward trade, and this stock should meet its objective over the coming months. So a stock that still has some potential downside to trade, although it's getting extended now and dangerous to sell short from current levels.


Goldman (GS)

Back in March 2012 I was looking for a high and monitoring a few stocks to help find a high point in the major US markets.

If you look at the larger stocks that move with the major stock markets you can gain a massive edge to potential ideas aligning together, I felt at the time Goldman was offering clues to a potential reversal in the main markets as well as decline in the individual stock.

You can clearly see that from the low marked B there is a 5 wave advance. So a simple 5 wave move, Elliott Wave theory suggests once a market has developed a 5 wave move the pattern is likely maturing and reversal is setting up.

Furthermore it actually ended with a clear ending diagonal which further supported the idea that Goldman had topped.

The target was a test of $85. Was it crazy to suggest that price target when the stock is trading at $130?

GS
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Let's take a look at what has happened since then shall we.

GS
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You can see it virtually hits its target (well it fell short a little but almost a home run) and subsequently has bounced strongly back almost to the prior highs, it potentially has topped a 5 wave advance with wave 5 as a truncation which could be an important clue for the major US markets.

A strong decline in Goldman could be setting up with an initial target towards $100.

When you look at Goldman overlaid with an SPX chart you can see how important it could be in finding an edge with the main US markets.

SPX and GS
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Although one stock alone is not a reason to suggest the major markets have topped or about to, when I look at it together with other markets and clues, it potentially could be a small but vital clue, such as it was back in March 2012.


Chevron (CVX)

Chevron
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One stock I am following is a big Dow component and that is CVX, it has the potential to see a strong decline and I think it's just getting started. With a 5 wave advance this reversed well and appears to be confirming a strong reversal, although it's still in its infancy but still it is has great potential. Target around $85.

Chevron
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So you can clearly see that Elliott Wave is a valid tool if used correctly as well as used on the correct stocks, stock that have high volume can still be counted.

Until next time,

Have a profitable week ahead.

 


 

Nouf

Author: Nouf

Nouf
www.Wavepatterntraders.com

The information written in this article should not be used for any trade recommendation.

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