Elliott Wave -
Part Of Stock Market Forecast


This Elliott Wave page has been updated. Please see the bottom to learn more as well.

Stock prices go up and down in predictable wave patterns. You can use these predictable patterns to forecast future stock market directions.

This chart, courtesy of Elliott Wave International shows the basic wave structure.

elliott wave





Basically, there are five waves up, follow by three waves down and then the whole process repeats itself.

Wave 1

This is an impulse wave and often reverses from the previous trend like end of wave c. It normally terminates on the first resistance/support level on the chart. Wave 1 can also subdivide into five little waves (1 to 5) as shown above. It is often the shortest of all waves.

Wave 2

This is a retracement of wave 1, known as corrective wave. This normally dips to a fibonacci retracements of 0.382 to 0.941 of wave 1. Quite often, it retraces to 0.618 of wave 1, but it can never retraces more than wave 1, otherwise it's not wave 2.

Wave 2 can also subdivide into three little waves, namely a, b and c.

Wave 3

This is normally the longest wave of all 5 Elliott waves. So to make tons of money, jump on board this wave!

Wave 3 is a certain percentage external retracement of wave 2 and wave 1, but often terminates at the golden fibonacci retracements ratio of 1.618. It can also subdivide into five little waves as well.

Wave 4

This is a corrective wave and a retracement of wave 3. Although Elliott stated that wave 4 can not retrace into wave 2/ pass wave 1, I have seen it happened on many occasions.

Generally, wave 4 retraces certain percentage of wave 3, normally in the range of 0.382 to 0.618. But I have seen it gone just below the peak of wave 1 before.

Wave 4 can also subdivide into 3 little waves a, b and c.

Wave 5

This is the last uptrend wave in the series and often forms a diagonal triangle shape and also a butterfly shape which often implies end of trend is near.

This is a certain percentage of wave 3 and wave 1. When these two fibonacci prices meet, the end of wave 5 is imminent and a big fall will follow!

It can also subdivide into 5 little waves.

Wave A

Wave A to C is a retracement of all 5 waves. You use technical indicators such as MACD divergence as well as fibonacci retracement to predict where wave A ends.

Wave A can either sub divide into 3 or 5 little waves.

Wave B

This is a retracement of wave A. This can be any percentages, but normally terminates at 0.618 of A.

Wave B can subdivide into 3 little waves a, b and c.

Wave C

This is normally the longest of the corrective/retracement waves. But once again, it can be any percentage retracement of all 5 waves.

From what I have seen, normally it's same length as wave A and also 1.618 of B. Wave C can also subdivide into 5 little waves.

These are just the basics and there are lots to consider. Sometimes, these patterns are literally staring at you, other times it could be quite confusing and difficult to spot, especially on wave 2 and 4 where they are developing zig-zag patterns or wedge/pennant patterns. But if you are not sure, just trade wave 1-3 or a-c as they all have minimum 3 waves.


Just How Do You Label These Waves ?

elliott-wave-2-retracemnet-eaxmple



The above chart showed 5 minutes live chart of S&P500, Friday 17/4/09 at 16:00pm UK time, US 11 am .

If you day trade occasionally, like me, do you go short or long here? The 1st part looked ok, like wave 1-5, but what about these retracement waves? What wave are we in ? I have seen it gone past the low before? Is it on it's way up as well?


Confused?

I was, until I remembered watching a video on Elliott wave earlier. A few clips and charts jogged my memory and thanks to below video from Elliott Wave International. I traded this S&P500 accordingly afterward and made some nice profit!

You can watch this video on Elliott Wave free. Click on arrow/ cursor for the preview. Click on the link to watch the full video. Although, Jim talked about currency, it can be applied to any charts like above.



Well, what's the answer?

Well, thank you Elliott Wave International, I have made money after watching this video!




Want To Know Where S&P500, Nasdaq, Dollar Index, Euro- USD, Gold & Silver Are Heading Using Elliott Wave ?


You can learn more from experts over Elliott Wave International like Bob Pretcher who correctly predicted 1987 crash, March low of 2009 and the subsequent rally.

Monday 2nd November Financial Forecast Short Term update on S&P500 index indicated it would bounce up to 1060.

4th November, it touched this target before closing at 1047. Wow! What a prediction!

If you know in advance roughly where the above will be heading and also get these updated on Monday, Wednesday and Friday, would do like to make some money from this newsletter?

Click here to find out more from

Elliott Wave International Financial Forecast Short Term Update Services

Want To Learn More Techniques?

You can also download the following Elliott wave articles, courtesy of Elliott Wave International and sign up as a free member to access to online free learning stuffs. I still receive free articles and sometimes video and learn a few tips that I did not know!







For those of you who know these waves theory/patterns already, but want to do the analysis yourself, please click on this waves analysis page where I will show you some tools to take it to the next level to predict future stock market turning points.



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