Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24
How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - 17th Feb 24
Why Rising Shipping Costs Won't Cause Inflation - 17th Feb 24
Intensive 6 Week Stock Market Elliott Wave Training Course - 17th Feb 24
INFLATION and the Stock Market Trend - 17th Feb 24
GameStop (GME): 88% Shellacking Yet No Lesson Learned - 17th Feb 24
Nick Millican Explains Real Estate Investment in a Changing World - 17th Feb 24
US Stock Market Addicted to Deficit Spending - 7th Feb 24
Stocks Bull Market Commands It All For Now - 7th Feb 24
Financial Markets Narrative Nonsense - 7th Feb 24
Gold Price Long-Term Outlook Could Not Look Better - 7th Feb 24
Stock Market QE4EVER - 7th Feb 24
Learn How to Accumulate and Distribute (Trim) Stock Positions to Maximise Profits - Investing 101 - 5th Feb 24
US Exponential Budget Deficit - 5th Feb 24
Gold Tipping Points That Investors Shouldn’t Miss - 5th Feb 24
Banking Crisis Quietly Brewing - 5th Feb 24
Stock Market Major Market lows by Calendar Month - 4th Feb 24
Gold Price’s Rally is Normal, but Is It Really Bullish? - 4th Feb 24
More Problems in US Regional Banking System: Where There's Fire There's Smoke - 4th Feb 24
New Hints of US Election Year Market Interventions & Turmoil - 4th Feb 24
Watch Consumer Spending to Know When the Fed Will Cut Interest Rates - 4th Feb 24
STOCK MARKET DISCOUNTING EVENTS BIG PICTURE - 31st Jan 24
Blue Skies Ahead As Stock Market Is Expected To Continue Much Higher - 31st Jan 24
What the Stock Market "Fear Index" VIX May Be Signaling - 31st Jan 24
Stock Market Trend Forecast Review - 31st Jan 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

How Elliott Waves Simplify Your Technical Analysis

InvestorEducation / Elliott Wave Theory Nov 13, 2020 - 12:28 PM GMT

By: EWI

InvestorEducation

Here's a key insight into Elliott waves and classic technical chart patterns

First, before we explore a key insight into Elliott waves and technical chart patterns, expect to see a growing number of comments about technical analysis in the financial press.

That is, if a bear market in stocks has started. (The rally over the past few days notwithstanding -- after all, stocks are still well off their highs for the year.)

As a classic Elliott Wave Theorist, a monthly publication which provides analysis of financial markets and social trends, says:

Technical analysis becomes popular in bear markets and loses popularity in bull markets.

For example, the country's first major books on technical analysis -- Technical Analysis and Stock Market Profits (Richard Schabacker) and The Dow Theory (Robert Rhea), were published in 1932. Of course, during that year, the nation was in the depths of a historic bear market.


Now, here in the closing weeks of 2020, some technical analysis references are already being made by some high-profile investment pros.

For example, on Oct. 27, a long-time and well-known global money manager was quoted in a CNBC headline:

Looks like a 'double top' in the S&P 500, [veteran] investor warns

On Oct. 30, Barron's warned:

A double top is bad news. It's a pattern in stock charts that forms after a security or index hits two highs close to one another with a dip in between. It looks like a capital letter M.

Of course, there are many other classic technical chart patterns, both bullish and bearish.

And, the key insight into how Elliott waves relate to these technical chart patterns is this: Elliott waves subsume all of them. This includes the head and shoulders top and bottom, rounding tops and bottoms, triangles, rectangle, double and triple tops and bottoms, diamond, falling and rising wedge, pennant, flag and any other valid technical chart pattern.

Let's pick out just one of them -- the head and shoulders top -- to show an example of how the Wave Principle accommodates classic technical patterns. The commentary is from an Elliott Wave Theorist:

In a normal wave development, wave five of 3 and wave 4 form the "left shoulder" of the pattern, wave 5 and wave A form the "head," and wave B and wave one of C form the "right shoulder." Wave two of C creates the return to the neckline that is typical of the pattern.

In another issue of the Theorist, Robert Prechter approached the subject this way:

Traditional technical-analysis stock patterns, Dow Theory and other descriptions of market form fall within the compass of the Elliott wave model. I think this is an important point, because the Wave Principle can consolidate technical analysis under a single model.

Now, even though the Wave Principle subsumes well-known patterns -- that doesn't mean a technically inclined investor should stop being on the lookout for these patterns.

As the Wall Street classic book, Elliott Wave Principle: Key to Market Behavior, by Frost & Prechter, says:

The Elliott Wave Principle not only supports the validity of chart analysis, but it can help the technician decide which formations are most likely of real significance.

If you want to learn more about the Wave Principle, you can read the online version of Elliott Wave Principle: Key to Market Behavior -- free.

That's right -- this Wall Street classic can be on your computer screen in moments right after you sign up for a Club EWI membership. Club EWI is the world's largest Elliott wave educational community with about 350,000 members and it's free to join. Members get free access to a wealth of Elliott wave insights into financial markets, trading and investing.

Simply follow this link to get started: Elliott Wave Principle: Key to Market Behavior -- free and unlimited access.

This article was syndicated by Elliott Wave International and was originally published under the headline How Elliott Waves Simplify Your Technical Analysis. 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.


© 2005-2022 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