Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21
UK Covid-19 Booster Jabs Moderna, Pfizer Are They Worth the Risk of Side effects, Illness? - 22nd Nov 21
US Dollar vs Yields vs Stock Market Trends - 20th Nov 21
Inflation Risk: Milton Friedman Would Buy Gold Right Now - 20th Nov 21
How to Determine if It’s Time for You to Outsource Your Packaging Requirements to a Contract Packer - 20th Nov 21
2 easy ways to play Facebook’s Metaverse Spending Spree - 20th Nov 21
Stock Market Margin Debt WARNING! - 19th Nov 21
Gold Mid-Tier Stocks Q3’21 Fundamentals - 19th Nov 21
Protect Your Wealth From PERMANENT Transitory Inflation - 19th Nov 21
Investors Expect High Inflation. Golden Inquisition Ahead? - 19th Nov 21
Will the Senate Confirm a Marxist to Oversee the U.S. Currency System? - 19th Nov 21
When Even Stock Market Bears Act Bullishly (What It May Mean) - 19th Nov 21
Chinese People do NOT Eat Dogs Newspeak - 18th Nov 21
CHINOBLE! Evergrande Reality Exposes China Fiction! - 18th Nov 21
Kondratieff Full-Season Stock Market Sector Rotation - 18th Nov 21
What Stock Market Trends Will Drive Through To 2022? - 18th Nov 21
How to Jump Start Your Motherboard Without a Power Button With Just a Screwdriver - 18th Nov 21
Bitcoin & Ethereum 2021 Trend - 18th Nov 21
FREE TRADE How to Get 2 FREE SHARES Fractional Investing Platform and ISA Specs - 18th Nov 21
Inflation Ain’t Transitory – But the Fed’s Credibility Is - 18th Nov 21
The real reason Facebook just went “all in” on the metaverse - 18th Nov 21
Biden Signs a Bill to Revive Infrastructure… and Gold! - 18th Nov 21
Silver vs US Dollar - 17th Nov 21
Silver Supply and Demand Balance - 17th Nov 21
Sentiment Speaks: This Stock Market Makes Absolutely No Sense - 17th Nov 21
Biden Spending to Build Back Stagflation - 17th Nov 21
Meshing Cryptocurrency Wealth Generation With Global Fiat Money Demise - 17th Nov 21
Dow Stock Market Trend Forecast Into Mid 2022 - 16th Nov 21
Stock Market Minor Cycle Correcting - 16th Nov 21
The INFLATION MEGA-TREND - Ripples of Deflation on an Ocean of Inflation! - 16th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

How to Get a Consensus Before Placing a Trade

/ Learn to Trade Nov 21, 2012 - 09:12 AM GMT

By: EWI

If you've ever considered a major medical procedure, you likely know the importance of a second opinion. Even if your doctor or specialist is experienced and strongly recommends a certain course of action, it's still risky to make a critical health decision based on one person's view.

Likewise in trading: One solitary piece of technical evidence rarely provides enough information to make a trading decision. According to Elliott Wave Junctures editor Jeffrey Kennedy, it is best to get a second (or third, or fourth) opinion from supporting indicators before you commit to a trade.


In Orange Juice, July 2008 was a good shorting opportunity not merely for one reason, but because four pieces of evidence showed that lower prices were ahead.

To illustrate my point, let's examine some price charts of Orange Juice and look at the reasons why the consensus of evidence in Orange Juice in July 2008 argued for lower prices (Chart 1).

The first piece of evidence is glaringly obvious in Chart 2: the weekly trend is down:

Why is this important? Because a cornerstone belief of technical analysis is that trends persist. With the weekly trend down in O.J., odds favored more of the same in the weeks to come.

Chart 3 illustrates another piece of evidence: that the May-July advance in Orange Juice (basis the September 2008 contract) consisted of three waves.

Three-wave moves are important to Elliotticians because they are corrective wave patterns (i.e., countertrend moves).

A Bearish Engulfing pattern is evident in Chart 4, which also argued for lower prices in Orange Juice. It is a Japanese Candlestick pattern in which the distance between the open and close of the current price bar encapsulates the distance between the open and close of the prior bar. More important, the close of the current bar is below the open, and the close of the prior bar is above its open:

The final piece of evidence is illustrated below in Chart 5, which displays a bearish Popgun pattern:

A Popgun is a simple two-bar pattern that I have written about before... It typically forms at turning points and is composed of an outside bar that is preceded by an inside bar, similar to the Engulfing Candlestick pattern

With a strong downward trend and three additional supporting technical indicators, Jeffrey knew that he had a good opportunity to short Orange Juice. He had not just a "second opinion," but a third and fourth argument to strongly support his trading decision.

Jeffrey often says that market analysis and trading have taught him "a lot about life, and vice versa."

Just as one doctor's opinion may not be sufficient evidence to undergo the knife, a bearish wave count alone or a simple divergence in two indicators is probably not enough to raise your confidence level sufficiently to place a trade.


Learn to Apply Some of the Most Powerful Technical Methods to Your Trading

Get more lessons like this in a FREE 10-lesson video series from Elliott Wave International. Jeffrey Kennedy will show you how to incorporate technical methods into your trading to help you spot high-confidence trade setups. You'll learn the methods the professional traders use, like Elliott waves, MACD, RSI, candlestick patterns, Fibonacci and more!

Access your free lessons now >>

This article was syndicated by Elliott Wave International and was originally published under the headline Get a Second Opinion on Your Trades with a 5-Chart Example. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

About the Publisher, Elliott Wave International
Founded in 1979 by Robert R. Prechter Jr., Elliott Wave International (EWI) is the world's largest market forecasting firm. Its staff of full-time analysts provides 24-hour-a-day market analysis to institutional and private investors around the world.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in