Elliott Waves and their application

General Notes:

Elliott Waves and their application

Elliott waves are a great tool for traders. They give us a road map about the future, based on the diverse counts of the present. The problem is in the word "diverse". As implied in it, they are several plausible counts, at one time, while one is the preferred one, and the others are the alternates.

It is rare to find a situation, where there is only one possible outcome, but when it happens, it is advisable to act because usually it gives good results. Why this lengthy introduction?

Because yesterday such an alternate became the preferred one, and our view of the market changed considerably. We viewed, until now, the descent from January, as the start of the next big leg down in this rolling financial crisis.

The February move up was its correction, and was not supposed to be more than 100% of the descent. It was! Now, January move is labeled only as another correction which implies the S&P getting to 1200-50 before the possible big reversal. Why do we think that there will be another leg down, at all?

Because we do not believe in this recovery while the 0% rates, and stimulus programs are continuing. Growth in a nearly normal environment seems quite far. By the way, Greece is starting to look at the IMF instead of the EU for Help, and US politicians are going to verbal war with China! Can you believe it?

AUD/USD Visual Trading Update

Current Trading Plan:

Position: LONG
Last (15-03-2010) Closed position at 0.9140 (+0 Pips)
Long: since 17-03-2010 at 0.9200
Short: below 0.9070
Exit by Stop Loss: at 0.9200 (Breakeven)

Price:

Our trigger LONG was activated when the pair moved over its 4H double top limit. We see now two possible wedges: One inside the other. The fact that the pair has arrived at the weekly descending trend line, and that we see a general overbought picture, is a bit disturbing for our LONG. Nevertheless, we see a move to 0.9330-40 before this will end and reverse. Moving our SL to breakeven because the pair is on the verge of testing the breakout (H4 Chart).

RSI-STOC Combination: At Overbought levels.

ADX: Low velocity

MACD: Very positive Daily while 4H starting again to support it. Weekly positive-neutral.

EUR/USD Visual Trading Update

Current Trading Plan:

Position: LONG
Last (01-03-2010) Closed position @ 1.3926 (+64 pips)
Long: Since 12-03-2010 at 1.3750
Short: Below 1.3610
Exit by Stop Loss: 1.3610

Price:

The pair has broken out from its wide trading range, reversed quickly, returned higher, and reversed again. It seems that it is creating a small trading range. Our stop is still active, but we move our SHORT entry level at the SL level. Let's be positive and think how far this move can advance? The Fibonacci retracement ladder is giving us an idea. 1.42 will be crucial here. On the negative side: Look how it looks like the weekly trend line has repelled price.

RSI-STOC Combination: Positive: RSI over 50 with STOC

ADX: Low velocity but rising

MACD: Daily and 4H very positive. Weekly trying to get there.

USD/JPY Visual Trading Update

Current Trading Plan:

Position: OUT
Last (12-03-2010) Closed position at 90.10 (-45 Pips)
Long: above 91.30
Short: below 89.00
Exit by Stop Loss: --

Price:

The pair is still inside its descending daily channel. The possible exit from this channel will give us our LONG new entry. You can see in the 4H chart a possible 1-2-3 (the ascending channel is the 2) up formation, where the correction is an upward range. It is rare, but it is happening sometimes. The tentative break down of this small channel did not succeed (H4 Chart). The real test will appear when the pair will arrive at its weekly descending trend line, which is now the upper boundary for a possible symmetrical triangle.

RSI-STOC Combination: Positive. RSI hovering at 50 while STOC near to oversold.

ADX: Very Low velocity

MACD: Weekly and Daily neutral under 0 with the H4 neutral over 0

Charts Legend:

3 Price Windows: Main (Daily), Right Side (Up: 4 Hours, Down: Weekly)

Indicators:

Simple Moving Average (9): Green
Price Channel (10): Orange
Support & Resistance price areas: Pink and Light Green areas
Trend lines and Channel Boundaries: Blue
Elliott Waves Counts: Black and Blue numbers

RSI (10): Blue, STOC(5,3,3): Green, ADX(10): Blue
MACD (12,26,9): Blue, Signal: Red, Histogram: Green

Signals:

Long:  Above the Green line
Short: Below the Red line
Exit position: On crossing the Cyan line
SL in case of triggered level: Dashed Cyan Line

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