Tag Archives: learn elliott wave

Learn Elliott Wave – Spot The Mistakes | 18th October, 2017

Another brain teaser to test your Elliott wave knowledge:

S&P500 2017
Click chart to enlarge.

I have tried to make it a bit easier by violating only core Elliott wave rules and making the mistakes really bad ones. Price points of all waves are given so you can calculate lengths and look for the mistakes.

You can participate by either posting a chart or comment pointing out the five deliberate mistakes, or post a chart where you fix the wave count to remove the mistakes. It’s up to you. If making a comment, please refer to the degree of labelling the mistake is in.

I encourage all members who find this a bit challenging to really give it a go. This should be a great exercise to really hone your Elliott wave skills.

Hints:

There are two mistakes which violate the same Elliott wave rule.

One mistake is in a corrective structure, and to me it looks very obvious.

Another mistake violates a core Elliott wave rule, but it is a matter of judgement as to how the wave may subdivide on a lower time frame.

Another mistake violates a core Elliott wave rule, probably the most important core Elliott wave rule which should absolutely never be broken, ever.

Answers will be posted tomorrow after tomorrow’s analysis is published. You have 24 hours. Have fun!

Published @ 04:30 a.m. EST.

3 Most Important Things to Consider for Candlestick Reversal Patterns | 11th October, 2017

This daily chart of the S&P 500 identifies 16 candlestick reversal patterns. Only reversal patterns are considered here, not continuation patterns.

S&P500 2017
Click chart to enlarge.

The first #1 and #2 patterns are both Three White Soldiers. Pattern #1 comes after a short sharp fall in price, so it may be considered a reversal pattern. But pattern #2 comes within an upwards trend, so it is more of a continuation pattern here and would not be considered a reversal pattern as there was nothing to reverse.

This leads to point number 1:

For a reversal pattern to have meaning there must be something to reverse. A bullish reversal pattern should come after a decline in price. A bearish reversal pattern should come after a rise in price.

Pattern #3 is an important reversal pattern and it does come after a steady rise in price. It correctly predicted a consolidation.

This leads to point number 2:

Reversal patterns mean a reversal of the prior trend to the opposite direction or sideways. They do not only mean a complete 180 degree reversal; sideways is a direction too.

The Shooting Star at #4 does not come after a bullish rally. It comes within a consolidation, so it should not be considered a reversal pattern. This is another illustration of point number 1.

Likewise, the Bullish Engulfing pattern at #5 comes within a consolidation. There is nothing here to reverse.

The Piercing Pattern at #6, however, does come after a short sharp fall in price, so it should be considered a reversal. It did correctly predict the following 7 days of upwards movement.

This leads to point number 3:

Reversal patterns make no comment on how far price may travel in the new direction.

The Morning Star at #7 is the second reversal pattern at lows after a short sharp fall. Along with the Piercing pattern, it correctly predicted the next rise in price.

However, the Bullish Engulfing pattern at #8 does not come after a fall in price. It comes within a consolidation. There is nothing here to reverse, so it should be ignored.

The Gravestone Doji at #9 is normally a bearish reversal pattern. Its forte is in calling tops. Here, it comes at the end of a bearish movement, so it is out of context. It cannot be calling a reversal in a bull move as there was no bull move prior to the pattern.

At #10 the Bullish Engulfing pattern does come after a reasonable fall in price, so it should be considered a reversal pattern. This pattern was followed by a persistent bullish move.

Like the Gravestone Doji, the Dragonfly Doji at #11 is out of context. Here, it is at highs and within a small consolation. Dragonfly Doji are bullish reversal patterns when they occur after a bearish move, but this one does not.

Another pattern within the consolidation at #12 should be ignored. There is no bullish move here to reverse for the Bearish Engulfing pattern.

The Hammer pattern at #13 does not come after a reasonable bearish trend; it was only the second day of a fall in price. There is nothing to reverse, so it should be ignored. The long lower wick is still bullish though. As a Hanging Man pattern it would require bearish confirmation in the following candlestick, which did not come.

The Hanging Man at #14 though does come after a bullish move. But the bullishness of its long lower wick still requires bearish confirmation, which did not come. The following candlestick is quite the reverse; it is another bullish signal. As #15 comes within a small consolidation, it may be considered as a bullish signal.

Finally, the Piercing pattern at #16 comes after a long upwards trend, so it should be considered as a bearish signal.

Published @ 05:57 a.m. EST.

Best Fit Channels | 26th September, 2017

If an Elliott channel does not fit a movement, then a best fit channel has to be drawn. The best fit is a channel which contains most or all movement within a trend and is tested the greatest number of times.

Example:

Gold 2017
Click chart to enlarge.

A channel drawn about this impulse using either of Elliott’s techniques does not contain all movement. Therefore, when compared to a best fit channel, Elliott’s channel drawn this way may not be as reliable in indicating when the movement has been over and there may have been a trend change.

Gold 2017
Click chart to enlarge.

Redrawing the channel as a best fit now contains all the impulse. Therefore, for this impulse on this chart, this best fit channel should be a more reliable and more conservative indicator of a trend change.

Published @ 04:36 a.m. EST.

Learn Elliott Wave – Spot The Mistakes | 3rd August, 2017

For those who want to hone their Elliott wave knowledge, have a go at spotting my deliberate mistakes:

Gold Daily 2017
Click chart to enlarge.

This one is easy (at least, I think it is and I’ve really tried to make it easy).

There is one mistake in the triangle (just one!) and one mistake in the impulse.

Can you find them both?

Name the rules which I have deliberately broken here. Answers will be posted in comments tomorrow or the day after.

Note: During the process of preparing this post, I found a solution that fixes my main problem with the current alternate wave count. This solution will be published in tomorrow’s Gold analysis.

Published @ 05:49 a.m. EST.