Elliott Waves and Channels using Gold and Nifty

Elliott Waves and Channels using Gold and Nifty


  • 31 Oct 2017 04:28 AM

If you are an advanced user of Channels this video is apt for you and explains the state of the Dow today. If you are new to the subject then first read the rest of the article below on the use of EW analysis and channels for setting targets. It is simple and should get you started on a very simple technique that works on all time frames.

A look at the Dow Jones and the use of channels along with EW analysis for trend following. 4 mins Video.

http://screencast-o-matic.com/watch/cb6wfq2n5u

While the use of trendlines are basic to the market the use of Channels where prices are expected to move within two parallel lines are basic to Elliott wave [EW] Analysis. The reason is that the classic 5 wave sequence in EW analysis usually moves inside a channel. Channels are also a useful tool setting targets for each stage of the wave under development. To explain I will use daily charts of Gold at the start of 2017. Breaking out of a triangle the chart below shows the initial wave marked as wave i. The subsequent dip is wave ii. Draw a Trendline from the bottom to the low of ii.

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Next. Draw a parallel line from the high of wave i to project a target for wave iii. In reality we see that wave iii is exceeded.

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Next once prices stop in wave iii draw a trendline from the high of i to iii. 

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Then a parallel line of the highs to the bottom. This gives us a target for wave iv. Note how the lower line was almost touched in the next 3 days.

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Extend the parallel lines upwards to set the target for wave v up.

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This 5 wave rise is wave 1 of an up move of larger degree and followed by a correction in a-b-c. A break of this rising channel marks a trend reversal from wave 1 towards wave 2. 

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Nifty

This technique can be repeated at larger time frames as well. Also channels need to adjust to changing speed of the market. This chart of nifty shows how wave iii exceeded the high of the channel. Wave iii then continued in a new channel for many weeks. 

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The next chart shows the entire rise and channel break after a 5 wave rise marked as wave 1.

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At a larger degree you can do the same thing for larger degree trends. Draw a channel from the bottom to the wave 2 low. The target should be the upper end of the channel which was overshot. 

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The next high has been marked as 1 again because this second rally was shorter than the first. Now after prices have fallen below the lower line as shown above, redraw the trendlines to accomodate this price action. So now the new trendline should go lower to touch the low of this new wave 2. 

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Now draw a parallel Line for this trendline to make a new channel that touches the high of the new high and projects upwards. All the highs ended at the upper channel line.

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Wave 4 above did drop a little below the lower trendline. To project wave 5 up we have to first connect the lows of 2-4 to make a trendline.

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Then make a parallel channel of this to the highs and extend it ahead for a target for wave 5. This was achieved later. Then the lower line broke marking end of this rise in early 2004 and a correction set in for the next 5 months. A 5 wave rally is complete.

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The above charts show to even a non EW analyst the use of trendlines and channels for target setting and trend following. To the EW analyst how to combine the two. And if you are new to EW anlysis do watch my EW basics video at the following link to know how it works.

https://www.youtube.com/watch?v=RHEOJRbcLFQ&t=836s

 



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