¤ Chart A shows the weekly chart of Ford Motor Completing a Wave Three decline.
The next phase is a Wave Four rally with the Elliott Oscillator pulling back to the zero level.
A
B
Look for a rally in Wave
Four plus the Elliott
Prices rallied in
Oscillator should pull
Wave 4 to the
back to the zero level.
50% Retracement
Level
¤ In chart B, the prices have rallied to the 50% Fibonacci Retracement level. The Elliott Oscillator has traded to the zero level, indicating the relief of an over sold condition. See the next page for Type One Sell.
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Type One Sell in Weekly Ford Motor
¤ Chart A shows a completed Wave Four. The Profit Taking Index is greater than the minimum requirement of 35 (it is at 47). This indicates a new low in Wave 5.
¤ The Wave Four channels are holding prices showing a large potential for a fast decline in Wave Five.
A
B
Wave 4 Channels
÷
Stop
÷Sell
PTI
¤ Sell on the cross of the Trend line with stops above the Wave Four high. The target is to new lows below 25.00
¤ Chart B shows the subsequent sell off in Wave Five.
¤ This usually sets up a Type Two Buy. See next page for subsequent price action.
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Applying Technical Analysis
Type Two Buy in Weekly Ford Motor
Following a Type One Sell (As seen on the previous page)
¤ Chart A shows the software generated Wave count. A Five Wave sequence is completing plus the Elliott Oscillator is showing good divergence.
¤ Buy on the cross of the DMA with a stop under the lows.
A
B
Previous Wave 4
÷
New Wave 3ø
Divergence
ñ
Buy
¤ The first target is the previous Wave Four high near 37.00.
¤ When prices trade to the target, one can tighten stops and monitor the software generated Elliott Wave counts for a new Wave Three in the same direction.
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Applying Technical Analysis
Cross-Referencing to Weekly Data
¤ The following chart shows the September 93 DMark completing a clear Wave Four profit taking decline.
¤ The Elliott Oscillator is to zero and the Profit Taking Index is greater than 35 (at 46).
Sept 93 DMark
Daily
See The Weekly Chart
on the next page
The Wave Four channels are also holding.
¤ All of this should set the stage for a rally to new highs.
¤ Now lets check the weekly on the next page.
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Applying Technical Analysis
Cross-Referencing to Weekly to Daily
Sept 93 DMark
Daily
The daily chart shows the
potential for a new high.
But, the weekly does not
agree.
IN THIS CASE, the weekly
overrides the Daily
DMark Weekly
Weekly shows Wave 4 over and the
market selling in Wave 5 to new lows
PTI > 35
To new lows
Elliott Oscillator
to zero
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Applying Technical Analysis
Cross-Referencing Pays Off
DMark Weekly
CAN YOU GUESS WHAT THE
WEEKLY WILL DO NEXT??
See next page for answer.
Sept 93 DMark
The Daily completed an ABC Wave 4
Daily
4
correction as shown on the weekly chart
The market declined to new lows
as suggested by the weekly chart
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Subsequent Action on Weekly DMark
Sept 93 DMark
Weekly
÷Previous Wave 4
Buy on cross of
trend line
Divergence
Once 5 Waves are complete, the
market changes direction and
trades to the previous Wave 4
Previous Wave 4 Target
÷
ï Buy
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Applying Technical Analysis
Alternatives In Elliott Wave Analysis
LOCALIZED ELLIOTT WAVE COUNTS:
This option allows the user to force
the software to start an Elliott Wave
count from any point on the chart. In
certain cases, the market tends to
make a low and rally off this low with
great momentum. However, since the
software uses the entire data in deter-
mining the Wave count, it may be a
while before the software logic fits the
current market action into the Wave
Count.
By Localizing the Elliott Wave
Count, the software can be set to ig-
nore any past data and only use
data from the current pivot selected
by the user to derive the Elliott
Wave counts.
ALTERNATE COUNTS
The Alternate Elliott Wave Count sequence allows the user to have the software display various alternate wave counts. Three different Alternate Wave Counts are offered. We will discuss these various alternate Wave counts in detail.
The major purpose of the Alternate Wave counts are to provide
the user with a second opinion at crucial junctures.
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ALTERNATE 3 (Long Term)
Once the Original (default)
Wave analysis detects a Five
Wave sequence, it continues to
ORIGINAL (DEFAULT)
look for a rally in the opposite
WAVE COUNT.
direction with the previous
Wave Four as a minimum price
target. Even if the market fails
to rally to this target, the routine
Continues to look for
still continues to look for this
a rally to emerge.
pattern until the low of the
original Wave Five is taken out.
î
The following example shows
the March 95 Soybeans with the
Original (default) Wave count.
From the low of Wave 5, the
software continues to look for a
rally in the opposite direction
with a price target near 610 (previous Wave Four). If the market rallies strongly to the target, the software will pick up a new Wave Three rally.
The only way the software will abandon this routine is if the prices actually makes a new low. Then the new low becomes the new Wave Five.
The ALTERNATE 3
routines provide a
longer term count as
shown to the right.
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The following chart shows the market making a new low as forecasted by the Alternate 3 (Long Term) Wave Count. Listed below are our recommendations of when to use the ALT 3 Long Term Wave Count : A) If the rally from the end of a Five Wave (low/high) Sequence fails to generate a Wave Three in the opposite direction,
we recommend you display the Alternate 3
(Long Term) Wave count.
B) If the market momentum meets the param-
eters of the ALT 3 routines, then the software
provides an Alternate Wave count which repre-
sents a longer term view. When such an Alter-
nate Count is displayed, the user should be
very cautious and anticipate the potential for
another new low.
C) There are many cases when the param-
eters are not met and the ALT 3 (Long
Term) Wave count is the same as the De-
fault Wave Count. Under this scenario, the
user should stay with the original default count.
ALTERNATE 2 (Short Term)
This provides the user a short term break down of the Original Default count. For example, when the default count tracks a major Wave Three rally, the ALT 2 (Short Term) wave count provides the 5 waves inside the major Three. This is used in taking profits at the end of a major Wave Three.
Original (Default)
ALTERNATE 2
Wave Count.
Short Term Count
Shows a Major
Shows the smaller
Wave Three in
degree Five Wave
progress.
structure inside
the Major
Wave Three.
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ALTERNATE 1 (Aggressive)
The Original (default) Wave analysis continues to stay in a Wave Four until the Wave Four overlaps Wave One by 17% in commodities (0% overlap in stocks and indexes). Many times even when the Profit Taking Index drops to a very low number and the Oscillator has retraced 38%
over the Wave Three Oscillator peak, the software still delays switching the Wave Count.
The chart on the left is the
October Bean Oil with the
ORIGINAL (DEFAULT)
original Wave Count. As
WAVE COUNT.
you can see, the Wave Four
channels are crossed, the
rally is overlapping Wave
One and most importantly
the Oscillator has retraced
more than 138% (38% in
the opposite direction) of
the Wave Three peak.
Yet the software has to
continue to label the rally
as a Wave Four. Eventu-
Oscillator exceeds 38% of
ally this count becomes
W 3 peak
invalid.
W 3 peak
í
The Alternate 1 (Aggressive) Wave count was designed to end this long drawn out Wave Four count and aggressively switch to a Wave Three count in the opposite direction The ALT 1 (Aggressive) Wave Count is recommended when the following occurs:
A) Any rally that is labelled as a Wave Four by the Original (default) Wave count becomes a suspect wave count when it breaks the Wave Four channels and the Oscillator exceeds 38% in the opposite direction of the Wave Three Oscillator Peak.
B) About 65% of the times, such conditions are also accompanied by a Profit Taking Index below 35.
Under such conditions, we recommend you use the ALT 1 (Aggressive) Wave count to view an alternate wave count or a second opinion. The next page shows an example.
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Applying Technical Analysis
ALTERNATE 1 (Aggressive)