$70, and the other at $79.
T-47
GET
Applying Technical Analysis
TYPE TWO BUY
JUNE’90 T-BONDS (Daily)—
TYPE TWO – BUY SETUP
Software
generated
DMA
BUY on
cross of
DMA with
stop under
the lows.
Wave Five near projected prices
Elliott
Elliott Oscillator to zero in between peaks
Oscillator
showing
clear
divergence
TYPE TWO BUY SETUP
STEP A
– Prices are near the Fifth
Wave projections.
RESULT:
Use DMA
STEP B – Elliott Oscillator confirms a
Prices rallying
to protect
Fifth Wave with clear diver-
in new phase.
profits
gence. The Elliott Oscillator
also pulled back to zero in be-
tween the peaks.
STEP C – Use the cross of the displaced
moving average (DMA) to en-
ter LONG.
STEP D – Place the protective stop un-
der the lows.
LONG
STEP E – Once the next phase is in
progress, protect profits using
the DMA. Now keep watch-
ing for a TYPE ONE
SETUP.
T-48
GET
Applying Technical Analysis
Wave Five near
projected prices
CRAY RESEARCH – CYR (Daily)
TYPE TWO – SELL SETUP
SELL on
cross of
DMA with
stop above
the highs.
Elliott Oscillator
showing clear
divergence.
Elliott Oscillator
to zero in between peaks
TYPE TWO SELL SETUP
STEP A – Prices are near the Fifth
Wave projections.
RESULT
SHORT
STEP B – Elliott Oscillator confirms a
Prices declining
Fifth Wave with clear diver-
in new phase.
gence. The Elliott Oscillator
also pulled back to zero in
between the peaks.
STEP C – Use the cross of the dis-
placed moving average
Use DMA
(DMA) to enter SHORT.
to protect
profits
STEP D – Place the protective stop
above the highs.
STEP E – Once the next phase is in
progress, protect profits us-
ing the DMA. Now keep
watching for a TYPE ONE
SETUP.
T-49
GET
Applying Technical Analysis
FORECASTING 5TH WAVE FAILURES OR DOUBLE TOP
MARCH ’92 (Daily) WHEAT —
FAILURE SETUP
Wave Five
Projection
Profit
Taking
Index
below 35
Wave Four
Channels
Elliott
Oscillator
to zero
FIFTH WAVE
FAILURE SETUP
RESULT:
double top as
forecasted
Prices drop sharply
The key here is that the
after
a double
PROFIT TAKING INDEX
top.
dropped below 35. Statistically,
this indicates a potential Fifth
Wave failure, or at best a double
top.
In situations such as these,
one can use the TYPE TWO
THE CONSERVATIVE AP-
SELL RULES and sell on the
cross of the DMA.
PROACH IS TO IGNORE
THIS LONG TRADE.
If the trade is taken long (using
an aggressive mode), one should
have very close stops.
T-50
GET
Applying Technical Analysis
FORECASTING FIFTH WAVE FAILURES OR DOUBLE TOP
Wave Five
Profit
GENERAL MOTORS – GM (Daily)
Projection
Taking
FAILURE SETUP
Index
below 35
Retracement
Levels
Wave Four
Channels
Elliott Oscillator
to zero
FIFTH WAVE FAILURE
SETUP
double top as
RESULT
forecasted
Prices drop
The key here is that the sharply after
PROFIT TAKING INDEX a double top.
dropped below 35. Statistically,
this indicates a potential Fifth
Wave failure or at best a double
top.
In situations such as these,
one can use the TYPE TWO
SELL RULES and sell on the
THE CONSERVATIVE AP-
cross of the DMA.
PROACH IS TO IGNORE
THIS LONG TRADE.
If the trade is taken long (using an
aggressive mode), one should
have very close stops.
T-51
GET
Applying Technical Analysis
FORECASTING FIFTH WAVE FAILURES OR DOUBLE TOP
Profit
DELTA AIRLINE – DAL (Weekly)
Taking
FAILURE SETUP
Index
below 35
Wave Four
Channels
Elliott Oscillator
to zero
FIFTH WAVE FAILURE
The key here is that the PROFIT
RESULT
5th Wave Failure
TAKING INDEX dropped be-
Prices drop
as forecasted.
low 35. Statistically, this indicates
sharply after a
a potential Fifth Wave failure or
5TH WAVE
at best a double top. THE CON-
FAILURE.
SERVATIVE APPROACH IS TO IG-
NORE THIS LONG TRADE.
In situations such as these,
Also note the Profit Taking In-
one can use the TYPE TWO
dex is at 15 (A VERY LOW)
SELL RULES and sell on
crossing the DMA.
number. THE LOWER THE
PROFIT TAKING INDEX,
THE GREATER THE ODDS
FOR A 5TH WAVE FAILURE.
T-52
GET
Applying Technical Analysis
Identify Failed Fifth Waves (Double Top)
The weekly chart of Apple Computer is shown below with software generated Elliott Wave Counts. Notice the Profit Taking Index (PTI) is at 14 (below 35). This indicates a potential for a Failed Fifth Wave, also known as a Double Top.
Possible Double
Top
Profit Taking
Index is at 14
(less than 35)
¤ When the Profit Taking Index (PTI) is less than 35, greater than normal profit taking is seen in the Wave Four. This leads to failed Fifth Waves and Double Tops (see next page).
T-53
GET
Applying Technical Analysis
Double Tops (Failed Fifth Waves)
Apple Computer (Weekly)
¤ Once the market trades to the previous high (with the Profit Taking Index less than 35, as seen on the previous page), the odds increase for a Double Top or Failed Fifth Wave.
÷Sell
ï Previous
Wave Four
low
¤ Use the Displaced Moving Average (DMA) to enter a short position with a stop above the high.
¤ Again, the first target is the previous Wave Four low near 43.
T-54
GET
Applying Technical Analysis
Another Double Top (Failed Fifth)
The weekly chart of AMGEN is shown below with software generated Elliott Wave Counts. The current Wave Four decline has a Profit Taking Index (PTI) of 30 (which is below the minimum requirement of 35). This again indicates greater than normal profit taking in the current decline.
PTI Less
Than 35
¤ This usually leads to a Double Top or failed Fifth Wave high (see next page).
T-55
GET
Applying Technical Analysis
Double Tops (Failed Fifth Wave High)
AMGEN (Weekly)
¤ With the Profit Taking Index at 30, when the market approaches the Wave Three high, the odds increase for a Failed Fifth Wave or a Double Top.
Sell
÷
Double Top with
PTI at 30 (below
35)
¤ Use the Displaced Moving Average (DMA) to enter a short position with a stop above the high.
¤ The previous Wave Four low near 50.00 is the first target. At this time, one can tighten stops or monitor the software generated Elliott Wave count for a new Wave 3
in the same direction.
T-56
GET
Applying Technical Analysis
Type One Buy in March 94 Cocoa
¤ Chart A shows the end of a Wave Four decline. The Elliott Oscillator has pulled back to zero confirming this.
¤ The Profit Taking Index is greater than 35 (at 54) showing good potential for a rally to a new high.
A
B
PTI
Buy
÷
ñ
Wave 4 Channels
Stop
¤ The Wave Four channels are holding, confirming a good potential for a new rally.
¤ Buy on the cross of a trend line or DMA (Displaced Moving Average) with a stop below the Wave Four low. The target is to new highs above 1250. Software projections are shown with a -5- (with dashes on either side).
¤ This also sets up a Type Two sell (seen on next page).
T-57
GET
Applying Technical Analysis
Type Two Sell in March 94 Cocoa
¤ Chart A shows the end of a completed Wave Five Rally.
¤ The Elliott Oscillator shows clear divergence
A
B
Sell
÷
ñ
Previous
Wave 4
Divergence
¤ Sell on the cross of a trend line or DMA (Displaced Moving Average) with a stop above the high.
¤ The first target is the previous Wave Four near the 1110 area.
¤ Chart B shows the sell point and subsequent action.
T-58
GET
Applying Technical Analysis
Type Two Buy in March 93 Canadian Dollar
¤ In chart A, the March 93 Canadian Dollar is completing a Five Wave Decline.
¤ The Elliott Oscillator shows clean divergence.
A
B
Previous
Wave 4
÷
New Wave 3 ø
ñ
Buy
Divergence
¤ Buy on the cross of a trend line or DMA (Displaced Moving Average) with a stop under the lows.
¤ The first target is the previous Wave Four high near the 80.00 level.
¤ When prices trade to this level, one can tighten stops and monitor the software generated Elliott Wave counts for a new Wave Three in the same direction.
T-59
GET
Applying Technical Analysis
Type One Buy in August 93 Gold
¤ Chart A shows a completed Wave Four. The Elliott Oscillator confirms this.
¤ The Profit Taking Index is greater than 35 (at 47) which indicates a potential for a rally to new highs.
A
B
PTI
ñ
ï Buy
Wave 4
Channels
¤ The Wave Four channels are holding prices which further supports the rally potential.
¤ Buy on the cross of a trend line or DMA (Displaced Moving Average) with a stop under the Wave Four low. The target is for new highs above the 390.00 level.
¤ This usually sets up a Type Two sell situation (seen on next page).
T-60
GET
Applying Technical Analysis
Type Two Sell in August 93 Gold
(with one FALSE signal)