Best of the Week
Most Popular
1.China Crash, Greece Collapse, Harbingers of Stock Market Apocalypse Forecast 2015? - Nadeem_Walayat
2.Gold Price Awaiting Outcome of Greece Crisis - Clive_Maund
3.Gold Price Peculiar 6 Month Cycles - Rambus_Chartology
4.Gold Price Just a Little Bit More - Bob_Loukas
5.8 Unprecedented Extremes Indicate a Stock Market Bubble in Trouble - EWI
6.Gold And Silver – Without Either, You Will Be Greeced - Michael_Noonan
7.Lies, Damned Lies and Statistics - James_Quinn
8.China Crash, Greece Crisis Harbingers of Stocks Bear Market? Video - Nadeem_Walayat
9.Gold and Silver Record Shorting - Zeal_LLC
10.Markets Big Deflationary Downwave Quick Reference Guide... - Clive_Maund
Last 5 days
Stock Market Pullback at Hand, Gold About to Rally? - 3rd Aug 15
Gold – The More Hate, The More Bullish We Become - 3rd Aug 15
Stock Market Critical Week Ahead - 3rd Aug 15
Gold Price Near Intermediate Bottom - 3rd Aug 15
Stock Market Reluctant Primary Wave IV? - 2nd Aug 15
Power and Compassion - 2nd Aug 15
Preparing for The Stock Market Crash - Inverse ETFs and Puts Timing... - 2nd Aug 15
Commodity Prices Slump Signals Slow Economic Growth Outlook - 2nd Aug 15
BSE Sensex Stocks Bear Market Underway - 2nd Aug 15
What Microsoft’s Dismal Earnings Report Really Tells You - 2nd Aug 15
Gold And Silver Charts Are The Compelling Story. Fundamentals Do Not Apply - 2nd Aug 15
The Fed Can't Stop the Commodity Bear Market - 1st Aug 15
Meet the Leader Who Turned Google Into a “Buy” - 1st Aug 15
The Greek Coup: Liquidity as a Weapon of Coercion - 1st Aug 15
Gold’s Amazing Resiliency - 31st July 15
Silver – A Century of Prices - 31st July 15
Demand for Gold Bullion Surges – Perth Mint, and U.S. Mint Cannot Meet Demand - 31st July 15
Reasons Why the Greek Crisis Will Only Get Worse - 30th July 15
The War On Cash: Why Now? - 30th July 15
Greece - The IMF Experts Flunk, Again - 30th July 15
Threat Of Cyber Warfare the “Other Reason To Own Physical Gold” Warns Rickards - 30th July 15
The 5 Biggest Myths and Lies about the Middle East - 30th July 15
Greece, Diversion, and the New World Order - 30th July 15
Ibuprofen Warning - The Pain Killer that can Kill You! - 29th July 15
More Ritholtz on Gold, and Another Response - 29th July 15
Crude Oil Price Is Lower – and You’re Richer - 29th July 15
U.S. Home Sales Market Is Dead – This Chart Proves It - 29th July 15
Greece- What Happens When Economists Talk Politics - 29th July 15
The Gold - U.S. House Prices Ratio As A Valuation Indicator - 29th July 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Stock Market Bubble in Trouble

Technical Tools to Help Identify High Confidence Market Price Reversal Zones

/ Learn to Trade Dec 20, 2012 - 05:04 AM GMT

By: EWI

"Price gaps, wave relationships and Fibonacci retracements act as support or resistance for countertrend price moves. When combined, these characteristics help identify high-probability reversal zones."

-Jeffrey Kennedy


Technical analysis offers several ways to spot pullbacks that indicate a reversal of the larger trend. When you use the Elliott Wave Principle, it can be very useful to "gain a consensus" from more than one indicator to spot a high-confidence trading opportunity.

The following lesson is adapted from Jeffrey Kennedy's December 11 Elliott Wave Junctures educational subscription service:

Identifying high-probability reversal zones is simple, IF you know what to look for.

  • Price gaps occur when the range of a price bar does not include the range of the previous bar. It acts as a reliable level of support and resistance for subsequent price action and should always be monitored.
  • Elliott wave relationships help identify a range that will lead to the resumption of the larger trend. The most common relationship between waves C and A of zigzags and flats is equality, the second being a 1.382 multiple.
  • Fibonacci retracements: Fourth waves tend to encounter Fibonacci support/resistance at a .382 multiple of wave three. Depending on the depth and duration of the correction, prices may also test the .500 and .618 retracements.

In the daily chart for Akami Tech Inc. (AKAM), you can identify all 3 characteristics:

  • Price gap at 34.69
  • Elliott wave relationship of 1.382 between waves C and A of a zigzag pattern at $33.79
  • Fibonacci retracement at 50% of the prior advance at $34.04.

Using this information, you can see the very tight zone in which you may locate a probable reversal in this market (within the red circle).

Rather than focus on a single indicator, Jeffrey encourages you to combine them together to better identify high-confidence reversal zones in your price charts.


Learn About Moving Averages, One of Jeffrey Kennedy's Favorite Indicators, in this Free 10-page eBook from Elliott Wave International

Moving averages are one of the most widely-used methods of technical analysis because they are simple to use, and they work. Now you can learn how to apply them to your trading and investing in this free 10-page eBook. Learn step-by-step how moving averages can help you find high-confidence trading opportunities.

Improve your trading and investing with Moving Averages! Download Your Free eBook Now >>

This article was syndicated by Elliott Wave International and was originally published under the headline Chart Example - How to Identify High Confidence Reversal Zones. 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.


© 2005-2015 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

Biggest Debt Bomb in History