First thing to do is to identify the time frame that one is comfortable for trading or investing there money for,accordingly one should select time-frame for labeling waves.Here i have tried to label from cycle to minor degree.Analysis below is targeting Primary degree wave 5 upward movement that might unfold in near future.
As mentioned in every book or article on elliot wave theory one should start labeling from an important low or high,hence i have taken covid lows for reference.I have tried to follow impulse labeling rules given in elliot wave theory and have labelled degrees according to time frame given in the books or in the material available online.
Reasons for impulse wave counts:
1)Primary wave 2 has not retraced primary wave 1 by more than 100%
2)Primary wave 3 has extended almost 261.8% of Primary wave 1
Current wave counts
Cycle : wave 1
Primary : wave 4
Intermediate : wave C
Minor : wave 5
Current Struture
Primary wave 4 Regular Flat ABC correction(3-3-5)
Logic for Demand zone between 284-266
1) Price support @ 284
2) 100% Extention of Intermediate wave A from wave B top @284
3) 38.2% Retracement of primary wave 3 @ 269
4) 123.6% Extention of Intermediate wave A from wave B top @266
5) RSI seems to be making positive divergence
Entry Signals
1)Look for bullish reversal candle like Doji,Hammer,Piercing,Engulfing pattern in the target zone marked for Primary wave 4
2)Next day price should cross the high of the reversal candle during the trading hours and should sustain above it through out the day(Take 30% position when it crosses the high),if it manages to close above the high of reversal candle then take rest of the 70% position.Additional confirmation will be of minor 2-4 trendline breach and price closing above minor wave 4 highs and 10 day SMA.
3)Keep a SL of reversal candle low on closing basis and size your trade accordingly in order to not to loose more than 1% of your trading capital
4)Target zone for primary wave 5 is 357-380,as it is primary degree that we are expecting to unfold price might take 2-3 months to hit the target zone.
This post is for some one who is interested in trading stocks or indexes through elliot wave theory.I have tried to show how to label waves of different degrees and have mentioned trade setup that one should look for and have also mentioned position sizing logic.
Hope anyone reading this post find the information useful.
As mentioned in every book or article on elliot wave theory one should start labeling from an important low or high,hence i have taken covid lows for reference.I have tried to follow impulse labeling rules given in elliot wave theory and have labelled degrees according to time frame given in the books or in the material available online.
Reasons for impulse wave counts:
1)Primary wave 2 has not retraced primary wave 1 by more than 100%
2)Primary wave 3 has extended almost 261.8% of Primary wave 1
Current wave counts
Cycle : wave 1
Primary : wave 4
Intermediate : wave C
Minor : wave 5
Current Struture
Primary wave 4 Regular Flat ABC correction(3-3-5)
Logic for Demand zone between 284-266
1) Price support @ 284
2) 100% Extention of Intermediate wave A from wave B top @284
3) 38.2% Retracement of primary wave 3 @ 269
4) 123.6% Extention of Intermediate wave A from wave B top @266
5) RSI seems to be making positive divergence
Entry Signals
1)Look for bullish reversal candle like Doji,Hammer,Piercing,Engulfing pattern in the target zone marked for Primary wave 4
2)Next day price should cross the high of the reversal candle during the trading hours and should sustain above it through out the day(Take 30% position when it crosses the high),if it manages to close above the high of reversal candle then take rest of the 70% position.Additional confirmation will be of minor 2-4 trendline breach and price closing above minor wave 4 highs and 10 day SMA.
3)Keep a SL of reversal candle low on closing basis and size your trade accordingly in order to not to loose more than 1% of your trading capital
4)Target zone for primary wave 5 is 357-380,as it is primary degree that we are expecting to unfold price might take 2-3 months to hit the target zone.
This post is for some one who is interested in trading stocks or indexes through elliot wave theory.I have tried to show how to label waves of different degrees and have mentioned trade setup that one should look for and have also mentioned position sizing logic.
Hope anyone reading this post find the information useful.
Trade active:
Yesterday we had hammer candle stick pattern which is followed by continued buying,today when price went above 282 long trade was active with 268 as closing stop loss on the down side
Tata motors have exceed our target expectation and have given tremendous returns to bulls.Post 530 high stock has been consolidating and have formed a range 520-470.We even saw breakout of this range on the upside before some days which was not sustained and price have retested lower range.The new high made during the breakout were not accompanied by higher volumes,also if we look at the RSI then there's clear negative divergence indicating end of wave 5.Stock has also breached 2-4 TL of wave 5 in todays trading session along with the breach of wave 4 low's,indicating top has already formed in the stock.Going ahead we might see price heading back to 360 and 288 levels as we have completed 5 wave on intermediate degree,there by completing primary wave 1,primary wave 2 end's near intermediate wave 4 which is coming at 288.One can go short at CMP of 470 with a stop of 500 on the upside and 360 and 288 as potential targets.
PS:Target sounds ridiculous and way to far but let's see how future pans out.