¤ Chart A shows a completed Wave Five sequence with the Elliott Oscillator confirming with clean divergence.
¤ Sell on the cross of the DMA (Displaced Moving Average) with a stop above the Wave Five High. The first signal was a false one, and the position was stopped.
A
B
2nd
÷Sell
1st Stop
False Sellø
ï Previous
Wave 4
Divergence
¤ The second sell signal caught the entire decline. Look for the previous Wave Four low near the 360.00 level as the first target.
¤ The first sell signal was a false signal. This was due to a sub-division or extension in the Fifth Wave.
¤ See the next page on how to handle false signals caused by sub-divisions.
T-61
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Applying Technical Analysis
Handling False Type Two Signals
(Caused by sub-divisions or extension in the Fifth Wave)
¤ The main or normal Elliott Oscillator (Tom’s 5-35) provides confirmation on the larger degree Five Waves.
¤ Since the Fifth Wave extended and sub-divided, a false signal was generated on the first sell signal.
2nd
False Signal
Sell
÷
ø
ö
Extended or Sub-
Divided Fifth
Wave
Extension Elliot Oscillator
3
5
5
4
4
ö
ö
Main Four
Smaller
Four
Main 5-35 Elliott Oscillator
5
4
ö
Main Four
¤ When you see false signals caused by extended or sub-divided Five Waves, use an Extension Elliott Oscillator (Tom’s Extended Oscillator 5-17) to see the divergence inside the sub-divided waves.
¤ The other way is to wait for the software provided price projection before entering the short. The price projection is shown as -5- (a number with a dash on either side).
T-62
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Applying Technical Analysis
Type Two Buy In Dec 93 Copper
(With FALSE signal caused by sub-division or extension in the Fifth Wave)
¤ The software shows Dec 93 Copper completing a Five Wave sequence.
¤ Buy on the cross of the DMA (Displaced Moving Average) with a stop under the lows.
Previous Wave 4 High
÷
ì
ë
False Buy Signal
Buy
¤ The first buy signal was a false one and the position was stopped.
¤ The second buy signal caught the rally. Now look for the previous Four high as the first target.
¤ The first buy signal was a false signal. This was due to a sub-division or extension in the Fifth Wave.
¤ See next page on how to handle false signals caused by sub-division.
T-63
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Applying Technical Analysis
Handling False Type Two Buy Signals
( Caused by sub-division or extension of the Fifth Wave)
¤ The main or normal Elliott Oscillator (Tom’s 5-35) provides confirmation on the larger degree Five Waves.
¤ Since the Fifth Wave extended and sub-divided, a false signal was generated.
Extension 5-17 Oscillator
4
4
5
Divergence on
3
extension
Main 5-35 Oscillator
4
Divergence on a larger scale
5
¤ When you see false signals or extended or sub-divided Five Waves, use an Extension Elliott Oscillator (Tom’s Extended Oscillator 5-17) to see the divergence inside the sub-divided waves.
¤ The Extension Oscillator (5-17) allows the user to handle sub-division or extensions within the Fifth Wave.
T-64
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Applying Technical Analysis
Power of 60 Minute Charts
The Daily Dec 93 Bonds completed a major top around 122.10. The 60 minute chart is shown below for the same day.
Using the 60 minute chart, one
í Major Top
could have entered a short posi-
Daily Dec 93
tion at 12124 within a few ticks
Bonds
of the all time high.
When the Elliott Wave count is
not clear on the daily, the 60
Blown Up on
minute offers a better resolution
60 Minute Chart
and provides excellent entry and
exit points.
Dec 93 Bonds
Major top on Dailyî
Sell
60 Minutes
ê
ëDMA
The 60 minute traded in a clean Five Wave rally with
clean Oscillator divergence. Sell the cross of the DMA
with a stop above the high.
Divergence
T-65
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Applying Technical Analysis
March 94 SP 500
The Daily March 94 SP 500 is
Major High
shown completing a Wave Five
Daily Mar 94
î
High.
SP 500
The 60 minute chart shows a
Fifth Wave also being completed.
One could have entered a short
position at 48080 just a few
points off the all time high.
Blown Up on
60 Minute Chart
March 94 SP
Sell
î
Major High on Daily
ê
500 60 Minutes
The 60 minute chart shows the completion of a Five Wave
sequence with clean Oscillator divergence. Sell on the cross
of the DMA.
T-66
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Applying Technical Analysis
May 94 Cocoa – Power of 60 Minute Charts
The 60 minute chart shows the
completion of a Five Wave se-
quence. The daily resolution was
Daily May 94 Cocoa
not very clear.
The 60 minute chart would have
provided a long entry a few ticks
off the low.
Blown Up on
60 Minute Chart
ë
May 94 Cocoa 60 Minutes
The 60 minute chart shows a clean divergence with Five
Waves. Buy on the cross of the trend line.
ì
Buy
Divergence
T-67
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Applying Technical Analysis
Nov 93 Soybeans
The daily chart made a major
high.
Daily Nov 93
Major High
í
Soybeans
The 60 minute chart showed the
completion of a Five Wave se-
quence. One could have entered
a short position at 730 within a
few cents of the major high.
Blown Up on
60 Minute Chart
Nov 93 Soybeans
Major High on Daily
í
60 Minutes
The 60 minute chart shows the completion of a Five Wave
sequence with clean divergence. Sell on the cross of the DMA.
Divergence
T-68
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Applying Technical Analysis
Type Two June 94 DM – 60 Minute Chart
60 Minute June 94 D-Mark
Sell
í
See chart below
Completed Five Wave sequence with clean divergence on Elliott
Oscillator. Sell on the cross of the DMA.
Divergence
60 Minute June 94 D-Mark
Sell
í
ç Previous Wave 4
The first target is the previous Wave 4 low at 5870.
T-69
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Applying Technical Analysis
Type Two May 94 Crude Oil – 60 Minute Chart
60 Minute May 94 Crude Oil
Previous Wave 4
íhigh near 15.00
Buy
í
The software shows a completed Five Wave sequence with clean
Oscillator divergence. Buy on the cross of the trend line.
See chart below
Divergence
60 Minute May 94 Crude Oil
í Previous Wave 4
T-70
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Applying Technical Analysis
May 94 60 Minute Chart of Cocoa
¤ The software shows May 94 Cocoa completing a Five Wave sequence.
¤ The Elliott Oscillator shows divergence between the Wave Three peak and the Wave Five peak.
60 Minute May 94 Cocoa
é
Sell
çPrevious Wave 4 Low
Divergence
¤ Sell on the cross of the Trend Line with a stop above the high.
¤ The previous Wave Four low at 11.50 is the first target.
¤ Once the prices trade to this target, tighten stops and monitor the software for a new Wave Three in the same direction.
T-71
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Applying Technical Analysis
June 94 Gold – 60 Minutes
¤ The software labels the new high as a Fifth Wave.
¤ The Elliott Oscillator shows clean divergence between the Wave Three and the Wave Five peaks.
60 Minute June 94 Gold
çPrevious Wave 4
Divergence
¤ Sell on the cross of a Trend Line with a stop above the highs.
¤ Now look for the previous Wave Four low near the 3860 level as the first target.
T-72
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Applying Technical Analysis
June 94 Swiss Franc – 60 Minutes
¤ The software labels the 60 minute Swiss completing a Five Wave Sequence.
¤ The Elliott Oscillator shows clean divergence between the Wave Three and the Wave Five peaks.
60 Minute June 94 Swiss Franc
çSell
Previous W
ì
ave 4
Divergence
¤ Sell on the cross of a Trend Line with a stop above the highs.
¤ Now look for the previous Wave Four low near the 6990 level as the first target.
T-73
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Applying Technical Analysis
Yen Cash – Weekly Wave Count
Sell on the break of
the trend line
ê
Clean Wave 4 Rally to the 50%
Fibonacci Retracement Level
PTI > 35
ëElliott Oscillator
to Zero
Sell
ê
T-74
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Applying Technical Analysis
Weekly Swiss Franc Cash – Double Top
We have a perfect looking Wave Four except for the Profit Taking Index. When the Profit Taking Index falls below 35, it increases the odds for a Double Top.
Profit Taking Index is less than 35.
The Profit Taking Index indicates
the potential for a Double Top.
The market has also broken the
Wave 4 Channels.
Oscillator pulled back to zero
See the next page for subsequent action.
T-75
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Applying Technical Analysis
Weekly Swiss Franc Cash – Double Top
PTI less than 35
Sell based on Double
Top potential
When the Profit Taking Index (PTI) is less than
35, in increases the odds for a Double Top.
Double Top
çSell
T-76
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Applying Technical Analysis
Type One Sell Setup on Ford Motor (Weekly)