Tag Archives: trend lines analysis

2 Early Channel Techniques | 21st September, 2017

Channels drawn using Elliott’s techniques, outlined here, cannot be drawn until a reasonable amount of a wave has completed. There are two techniques to draw a channel about a new movement earlier.

1. BASE CHANNELS

Gold 2017
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This is the earliest channel that can be drawn about a new movement. This channel was drawn at the end of minor wave 2.

Base channels have two main purposes:

1. As the wave progresses the edge which is opposite to the main direction of movement should provide support or resistance. Here, the wave is down and the upper edge should provide resistance to bounces along the way down. It is the opposite for a bull wave; the lower edge should provide support for pullbacks along the way up.

A sloping trend line offering support or resistance can be used to place trailing stops.

2. A third wave may be identified or confirmed if it has the power to break through the base channel in the direction of the trend. A third wave should have the power to break above resistance at the upper edge of a base channel for a bull wave. Here, minor wave 3 should have the power to break below support at the lower edge of the base channel.

2. ACCELERATION CHANNELS

Gold 2017
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Later on in the development of a wave the base channel may be redrawn as an acceleration channel. This may be done after a third wave shows enough power to break out of the base channel in the direction of the trend, or it may be done earlier.

Acceleration channels are redrawn each time price makes a new extreme in the direction of the trend.

When a third wave is complete, then this channel is an Elliott channel (drawn using the first technique).

Acceleration channels have one main purpose:

1. To show where corrections within the trend find support or resistance, on the side opposite to the trend.

The side opposite to the trend may be used to place a trailing stop when trading the trend.

Published @ 06:22 a.m. EST.

3 Elliott Techniques For Drawing Trend Channels | 20th September, 2017

The three basic Elliott Wave channels are:

1. FIRST TECHNIQUE – IMPULSE

Gold 2017
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Once enough structure is complete to begin to draw an Elliott channel (about one third to halfway through a wave) use the first technique.

A trend channel drawn using this technique may show where the fourth wave may end. If the fourth wave is contained within the channel, then the fifth wave usually ends either midway or at the opposite edge of the channel. While most markets behave this way, commodities can be different. Commodities often exhibit swift and strong fifth waves which overshoot channels, as in this example.

When the channel is breached by subsequent movement in the opposite direction, it indicates the wave is over and a trend change may have occurred.

2. SECOND TECHNIQUE – IMPULSE

Gold 2017
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If the fourth wave is not contained within a channel drawn using the first technique, then redraw the channel using Elliott’s second technique.

This redrawn channel may show where the fifth wave may end: either mid way or about the side opposite the fourth wave.

When the channel is breached by subsequent movement in the opposite direction, it indicates the wave is over and a trend change may have occurred.

3. TECHNIQUE FOR A CORRECTION

Gold 2017
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If the movement is expected to be a correction, then it may be contained within a channel. Most corrections are contained within channels, but a few such as expanded flats are not.

The channel may show where wave C ends, either mid way or at the edge of the channel.

When the channel is breached by subsequent movement in the opposite direction, it indicates the wave is over and a trend change may have occurred.

Published @ 06:16 a.m. EST.

3 Simple Trend Line Rules | 27th July, 2017

Trend lines used for support and resistance may have varying degrees of technical significance. Here are three simple rules to use to determine how much significance a trend line has and how much attention to pay to a breach.

Gold Daily 2017
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The stronger the line, the more important the breach.

Thus a line which is close to horizontal, very often tested, and very long held would be the most significant.

A line which is steep, only tested a very few times, and not long held offers very little technical significance.

On the monthly S&P500 chart, the green line has more technical significance than each of the yellow lines. The green line has a more shallow slope and is much longer held, although it has only been tested three times.

This analysis is published @ 05:08 a.m. EST.

Will Gold Backtest An Important Trend Line? | 18th July, 2017

This chart was last published on 9th of July showing a breach of an important trend line.

Gold Daily 2016
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Price is now bouncing up for another test. There is a little room still for a little more upwards movement, if price wants to come up to kiss the trend line.

Again, adding volume makes this simple trend line more powerful. The breach was supported by volume, but now the bounce is not. The volume profile is bearish, adding to confidence that price may now stay below the line.

This analysis is published @ 05:05 a.m. EST.

Gold Breached Important Trend Line | 9th July, 2017

On June 27th I published a daily chart of Gold with a simple trend line. In that post I posed the question: “How Gold behaves at this trend line in the next few days will be a strong indicator. Does the bull run continue or is it over?”

Gold Daily 2016
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The trend line was breached very clearly. The breach was followed by a typical correction up to resistance. Now price is moving down and away from the trend line.

Adding in simple volume gives this signal more depth. If a breach is supported by volume, then more weight may be given to its significance. The breach of July 3rd did come with increased volume, and volume increased further for the next downwards day of July 5th. After a small bounce to test resistance, further downwards movement for the 7th of July shows again strong support from volume.

Sometimes simple really is best.

This analysis is published @ 11:59 p.m. EST.

Drawing Bear Market Trend lines | 27th June, 2017

One of my favourite Technical Analysis texts is the classic “Technical Analysis of Stock Trends” by Magee. In this book Magee describes how to draw trend lines for bull and bear markets.

Gold Daily 2016
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To draw a trend line in a bear market draw the line from the high to the first major swing high within the bear market. Extend the line outwards. Assume the bear market remains intact while price remains below the line. When upwards movement breaks above the trend line, it is an indication of a potential trend change from bear to bull.

My definition of a breach is a full candlestick above and not touching the trend line.

This technique works on all time frames.

This chart is on a monthly time frame and indicates that Gold may remain in the larger bear market, which began on September 2011.

This analysis is published @ 03:02 a.m. EST on 28th June, 2017.

Drawing Trend Lines? Simple is Best | 27th June, 2017

One of my favourite Technical Analysis texts is the classic “Technical Analysis of Stock Trends” by Magee. In this book Magee describes how to draw trend lines for bull and bear markets.

Gold Daily 2016
Click chart to enlarge.

To draw a trend line in a bull market find the first two major swing lows, then draw a line across them. Extend the line out to the right. Assume the bull market remains intact while price remains above the line. When the line is properly breached, it is an indicator of a potential trend change from bull to bear.

This technique works on all time frames.

Gold began a series of higher highs and higher lows on the daily chart after the low in December 2016. Within this upwards trend, the first two swing lows are taken as the 27th of January and the 10th of March. This trend line has now been tested eight times, with downwards movement for the last session of the 26th of June being the eighth test.

How Gold behaves at this trend line in the next few days will be a strong indicator. Does the bull run continue or is it over?

This analysis is published @ 03:43 a.m. EST.