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NZ50, Auckland Property Market, and HSI Elliott Wave Technical Analysis – 12th July, 2015

I’ve been following the New Zealand stock market for a while now. This is the first time I’ve shared this analysis with members and the general public.

I’ve also more recently with interest been watching what’s happening in China and Hong Kong.

Note: This analysis is not a full Elliott wave analysis, but just the analysis I’ve already done for these markets to date.

NZ50 ELLIOTT WAVE AND TECHNICAL ANALYSIS

NZ50 monthly 2015
Click chart to enlarge.

For the NZ50 to confirm a bear market I would want to see:

1. A breach of the aqua blue bull market trend line by a close of 3% or more of market value below that line. (The trend line is breached on the daily chart at 5,846.97, so we need a close at 5,674.56 or below.)

2. A new swing low below the end of primary wave 4 at 5,097.08.

3. A breach of the maroon trend channel on the monthly chart.

While the bull market trend line is not breached by 3% or more a bull market should be expected to remain intact. Primary wave 5 may yet continue higher.

I am confident that my labelling of primary waves 1 through to 4 is correct. Primary wave 3 is just 1.1 points short of 2.618 the length of primary wave 1. This is a remarkable Fibonacci ratio between waves which lasted 10 and 54 months, respectively.

One cause for concern at the monthly chart level is there is so little divergence between price and RSI at the recent high. The last time the NZ50 saw a big bear market was preceded by years of strong persistent divergence between price and RSI. That it is not happening now may indicate primary wave 5 may not be over. There is no Fibonacci ratio between primary wave 5 and either of 1 or 3.

NZ50 weekly 2015
Click chart to enlarge.

Primary wave 2 was a deeper 0.43 flat correction, and primary wave 4 was a more shallow 0.08 zigzag.

Within primary wave 3, there is no Fibonacci ratio between intermediate waves (3) and (1), but intermediate wave (5) is just 0.9 points longer than 0.382 the length of intermediate wave (1).

There is negative divergence between price and MACD at the weekly chart level.

NZ50 daily 2015
Click chart to enlarge.

At the daily chart level, primary wave 5 is off to the left of the chart. Within primary wave 5, there are no Fibonacci ratios between intermediate waves (1), (3), and (5). Intermediate wave (2) is a 0.29 zigzag and intermediate wave (4) is a 0.14 flat correction; there is perfect alternation.

So far, since the last all time high at 5,927.10 on 16th March, there looks like what is a clear five down on the daily chart which was followed by a three up. Another five down has made a new low very recently and thursday last week saw a new low below that, and so this movement cannot be labelled A-B-C because a new low has been made after it was done. It would better be labelled 1-2, 1-2. This indicates some strong downwards movement next week as the middle of a third wave down begins.

ADX does not yet indicate a trend, however, and the market has been moving sideways in a range although the movement has a slight downwards slope.

The bull market trend line which goes back to June 2012 was breached about 5,846.97. If next week continues down as I expect, and we see a close at 5,674.56 or below, then I would have a little more confidence in expecting the NZ stock market is in a bear market. Next week shall be interesting.

AUCKLAND PROPERTY MARKET TECHNICAL ANALYSIS

Auckland Property Market 2015
Click chart to enlarge.

There looks like a fairly typical looking bubble developing in the Auckland Property market (Auckland has about 1/3 of the NZ population, so this is our largest market). The problem with bubbles and the problem with highs is they’re ridiculously difficult to pick an end for. Therefore, in this instance, I would use trend lines: if the lines are breached to the downside, then the bubble has most likely burst.

While New Zealand’s government debt has been rising in recent years, it is still relatively low in comparison to other countries. Currently, the debt is at 35.9% of GDP, so the country may be in a reasonable state to weather another economic downturn. However, household debt is not looking very healthy and looks to possibly have just last month reached new highs, over 160% of disposable income. It may be that recent entrants into the overheated Auckland property market are over-leveraged and are not ready to withstand an economic downturn.

The magazine cover on the chart is from the NZ Herald Property supplement section, from March 2015, and meets the criteria for a classic magazine cover indicator of a bubble / high.

New Zealand was affected economically during the Global Financial Crisis (or Credit Crunch), but not on the same scale as the USA or Europe. Comments from members and readers in New Zealand (or world wide) about NZ50 and Auckland property market are welcomed.

HANG SENG INDEX ELLIOTT WAVE AND TECHNICAL ANALYSIS

HSI monthly 2015
Click chart to enlarge.

The most recent rise on HSI, from the end of primary wave B, does not look at all like a third wave, not even the start of it.

The big drop for the GFC (to the low of October 2008) subdivides as a three. The following wave up also subdivides as a completed three, but it is less than 90% of the prior drop. So this cannot be a big flat correction and is more likely to be a huge combination, or less likely a double zigzag. A combination may be more likely because they tend to have deep X waves whereas double zigzags tend to have rather shallow X waves.

Within cycle wave X, primary wave C subdivides as a completed ending expanding diagonal. Because the diagonal is expanding, there is no (theoretical) limit to how long the final fifth wave can be so most certainly it could continue higher yet.

For a bear market to be indicated for HSI I would want to see the following things:

1. A new swing low below the last major low at 23,252.63 (the end of minor wave B within intermediate wave (5) ).

2. A breach of the bull market trend line (on the daily chart below) by a close of 3% or more of market value. This line is not yet met.

RSI did not reach overbought levels on the monthly chart just before the DotCom crash of 2000 – 2003, but it did though for the crash prior to that, the Asian Crash of 1997, which was preceded by RSI twice reaching overbought levels (but it showed no divergence).

At the peak of 2007, before the Global Financial Crisis, RSI was heavily overbought, but there was no divergence and RSI moved strongly higher right up to the peak and then fell with price.

Again, RSI is close to being overbought (not there yet), but it does not appear to be a reliable indicator for HSI (unlike the S&P500).

Volume data for July is incomplete (because the month is incomplete), and the volume for June shows an increase beyond that of May, and both months have reasonable volume. This increase in volume supports the fall in price.

Volume spiked on the last upwards month for April, which is very typical behaviour for the end of a rise in price.

HSI daily 2015
Click chart to enlarge.

The double trend line has worked so far nicely to show where the bull market has been finding support.

The ending diagonal is most likely complete, but it is still possible that intermediate wave (5) could continue higher. When the bull market trend line is breached, then the fifth wave zigzag would break below the (2)-(4) diagonal trend line, which is the same as the bull market trend line, so the possibility that intermediate wave (5) could continue higher would be extremely unlikely.

The recent fall on HSI is 20% of its market value. ADX is clear and strong: there is a trend and it is down.

The high for HSI was 29th April. NZ50 had its high later, on 16th March.

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MotiveWave is having a Hot Days of Summer Sale for 7 DAYS ONLY starting Wednesday, July 30th, 2014, with 20% off most products.*

This means 20% off Lifetime Licenses*, 20% off Leases, and 20% off Add-On Modules.

This special 20% off sale starts Wednesday, July 30th and ends Tuesday, August 5th at Midnight EST.

Make sure you take advantage of this sale before it’s gone!

* Excluding the Analyst Edition and the Additional 1 Year of Updates and Support products.

** The prices you see on the MotiveWave website are regular prices, but you will see the special 20% off Summer Sale discount applied during the purchase process before you are asked to pay. If, for some reason, you do not see the discount on the checkout page, please contact MotiveWave before purchasing and before the end of the sale.

AAPL Elliott Wave Technical Analysis – 24th April, 2014

Within the bigger picture this wave count sees AAPL in a super cycle zigzag correction which is just over two thirds completed.

Click on charts to enlarge.

AAPL daily 2014

Within the zigzag cycle wave b ended at 571.88 with a small truncation in the final fifth wave up.

At this stage I expect a big leading expanding diagonal is unfolding for a first wave at primary degree.

Within the leading diagonal intermediate wave (2) is a 72% correction of intermediate wave (1), and intermediate wave (4) is a 86% correction of intermediate wave (3).

I would expect intermediate wave (5) to be longer than intermediate wave (3) and to reach down to 484.54 or below. At 456 minor wave C within intermediate wave (5) would reach 2.618 the length of minor wave A.

Downwards movement is very slow and so the target may be yet another few weeks away.

Within intermediate wave (5) minor wave B may not move beyond the start of minor wave A. This wave count is invalidated with movement above 551.19.

At 252 cycle wave c would reach equality in length with cycle wave a. This target is about one year away.

AAPL hourly 2014

Within intermediate wave (5) so far minor waves A and B are most likely complete.

Within minor wave C minute wave i and now ii also are most likely complete.

At 480 minute wave iii would reach 1.618 the length of minute wave i.

The pink channel drawn about minute waves i and ii is a base channel. I would expect corrections along the way down to find resistance at the upper edge of the channel. Minute wave iii should breach the lower edge of the channel and should show an increase in downwards momentum.

Within minute wave iii no second wave correction may move beyond its start above 532.14.

FTSE Elliott Wave Technical Analysis – 2nd December, 2013

Last analysis expected that a second wave correction was over, but a clear channel breach and a clear five wave structure upwards on the hourly chart was required before I had confidence in the target. We did not get a clear channel breach nor a clear five wave structure upwards.

Movement below 6,708.52 invalidated the hourly wave count.

Click on the charts below to enlarge.

FTSE Elliott Wave Chart 2013

This wave count sees the FTSE in a fifth wave upwards at intermediate degree which should reach 7,103.67 minimum, and most likely above.

Upwards movement for minor wave 1 of intermediate wave (5) is ambiguous. It can be seen as either a three or a five. This wave count sees it as a five.

Downwards movement for minor wave 2 is now a complete double zigzag. The second zigzag in the double made only a slight new low below the first, but did move price lower.

At 7,406 minor wave 3 would reach 1.618 the length of minor wave 1. This target is still now about 20 trading days or sessions away.

Within the current downwards correction of minute wave ii at 6,526 minuette wave (c) would reach equality with minuette wave (a).

Within minor wave 3 minute wave ii may not move beyond the start of the minute wave i. This wave count is invalidated with movement below 6,316.91.

FTSE Elliott Wave Chart 2013

This 2 hourly chart shows the entire structure of minute wave ii.

Within it minuette wave (a) unfolded as a leading expanding diagonal. All its subwaves are zigzags, as they are most commonly.

Within minuette wave (c) the structure is incomplete, and I would expect more downwards movement. It looks like it may be unfolding as an impulse which would provide alternation with minuette wave (a).

I have drawn a parallel channel about minute wave ii using Elliott’s technique for a correction. Draw the first trend line from the start of minuette wave (a) to the end of minuette wave (b). Place a parallel copy upon the end of minuette wave (a). I would expect minuette wave (c) to find support at the lower end of this channel, and to be very likely to end there. When the channel is clearly breached by subsequent upwards movement then I would expect that minute wave ii is finally over, and the next wave upwards should have begun.

The next wave upwards is a third wave of a third wave, and I would expect to see a strong increase in upwards momentum.

AAPL Elliott Wave Technical Analysis – 13th November, 2013

Last analysis expected some more downwards movement towards a short term target calculated at 515 to 513.61. Downwards movement ended at 512.38, $1.23 below the lower end of the target zone.

Thereafter, price has turned higher and breached the parallel channel on the hourly chart.

Click on the charts below to enlarge.

AAPL Elliott Wave Chart 2013

The daily chart shows the structure of primary wave C upwards within a larger upwards correction for a cycle wave b zigzag.

Within primary wave C so far intermediate waves (1) and (2) are complete. Intermediate wave (3) is an incomplete impulse.

Within intermediate wave (3) minor wave 3 has no Fibonacci ratio to minor wave 1.

I have redrawn the channel about intermediate wave (3) this week using Elliott’s second channeling technique. Draw the first trend line from the lows of minor waves 2 to 4, then place a parallel copy upon the high of minor wave 3. I will expect minor wave 5 to most likely end midway within this channel, and if it gets higher to find resistance at the upper edge.

At this stage it is most likely that minor wave 4 is complete. In the unlikely situation that it continued further as a double combination, flat or double zigzag, then it may not move into minor wave 1 price territory. This wave count is invalidated with movement below 496.91.

At 572 intermediate wave (3) would reach equality in length with intermediate wave (1). At 560 minor wave 5 would reach equality in length with minor wave 1. I am aware that this target zone is rather large, and so as we get closer to the end I will try to narrow it down when I can add to it at a third wave degree.

AAPL Elliott Wave Chart 2013

Minor wave 4 is most likely complete now as a zigzag. Within it minute wave c is 1.24 longer than 1.618 the length of minute wave a.

The parallel channel about minor wave 4 zigzag is now clearly breached by upwards movement. This provides confidence that minor wave 4 should be over and minor wave 5 should be underway.

Minor wave 2 was a relatively shallow 44% zigzag correction of minor wave 1. If minor wave 4 is over now then it too was a relatively shallow 41% zigzag correction of minor wave 3. Within minor wave 2 minute waves a and c are very close to equality; within minor wave 4 minute waves a and c have a 0.618 Fibonacci relationship. There is no alternation in depth of correction or structure, but there is alternation within the structures.

If this wave count is correct this week at the hourly chart level then I would expect to see an increase in upwards momentum from AAPL over the next few days.

Within minor wave 5 no second wave correction may move beyond the start of the first wave. This wave count is invalidated with movement below 512.38.