Matching a Waves Personality with Your Count

It's so important to match the personality of a price pattern with your count. When they diverge, something may be wrong in your assessment.

Earlier today I posted this chart of the e-mini S&P 500 where I showed two high probability scenarios that might be unfolding based upon my evaluation of most recent price action.

So far so go in that assessment! However, the personality of the waves must match your evaluation of market structure.

"It's almost like a Doctor seeing a patient. You describe the symptoms. 

They must match the diagnosis! This is called a differential diagnosis"

In the same way, when evaluating a price chart in real- time if the wave personality doesn't match price action, it's often your first sign of trouble and an opportunity to reassess, take protective action against loss, or use progressive stops to lock in gains.

I hope you found this quick tip helpful and ...

Best of Trading

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ElliottwaveLive is not an investment advisory service or broker dealer. None of its contributors are registered investment advisors, licensed stock brokers or CTA's. The author may hold short term and long term positions in the futures, stocks and ETF's discussed herein. The author may also trade around those positions which may be in direct conflict with your positions. Complete trade disclosures of the contributor’s holdings are posted at www.elliottwavelive.blogspot.com. See Trader Disclosure. 

Trade at your own risk. The blog site, Newsletter and all other information, material and content accessible from this Site (collectively, the "Content")  provided herein provides the context for market analysis with respect to a market's, a security or a commodity's general position utilizing the Elliott Wave Principle. The Content contained herein are the opinion and general comments of the author and is based upon information that Mr. Sinibaldi considers reliable but neither ElliottWaveLive nor he warrants it's completeness or accuracy and it should not be relied upon as such. Mr. Sinibaldi or ElliottWaveLive (collectively, referred to as “EWL”) are not under any obligation to update or correct any content provided on this website. Any statements and or opinions are subject to change without notice. The content and comments contained herein neither purports nor intends to be, specific trading advice. It has been prepared without regard to any particular person's investment objectives, financial situation and particular needs. Information should not be considered as an offer or enticement to buy, sell or trade. 

A more and comprehensive Risk Disclaimer and Disclosure Statements is available within the left margin of this blogsite.   

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Fair Disclosure Notice: I do not have a position in any of the aforementioned futures markets or securities related to this article. 

Using Intraday Charts to Plot a Course for Gold

On April 16 I tweeted, " IMO, Gold 60 min chart looks like a B wave from HOD implying another move up may be in store. Prints above 1393.8 bolster my ST conviction."

When I mentioned this in real time what I was doing at the time was building my larger degree wave counts. As you will see, the Elliott Wave Principle allows me to set expectation for further price development. Let's take a look at the process.

As you know, corrective patterns burn time and tend to have overlapping waves. If the advance off the lows is to be labeled as a corrective advance, subsequent price action needs to meet the rules and guidelines of elliott wave but also the characteristics of wave personality should be met.

The B wave, as it turns out is an interesting development due to the fact that:

1. The pullback associated with w.b of w. (b) retraced .786 of w.a and unfolded in a 3-3-5 pattern ... a dead giveaway, according to the rules and guidelines of a flat correction. If this was true then prices would fall in five waves from the w.b crest to complete w.c of the larger degree w.(b) and prints below the origin of w.a would invalidate my interpretation.

2. You'll notice that w.(b) was also a deep correction suggesting that the larger advance that began from 1321.5 would also unfold as a larger flat. If so, counting a five wave advance from w.(b) low would complete the pattern and set the stage for either of three events:

• a full retracement to new lows
• a more complex correction would develop
• prices would continue to advance proving my analysis wrong

Moving forward these are my expectations of what I am looking for. Should the market move in a manner contrary to my analysis then odds are that I am wrong.

I've placed reverse Fibonacci extensions on the chart which reflect levels that are of interest to me. While not labeled, price has already reached a point where w.(c) = w.(a) ... the most common relationship. Thus, the limits to hold onto this interpretation would lie below 1447.8.

I hope you found this lesson helpful. Let's leave it there for now. We'll pick up this lesson over the next few days to see how things turned out.


Best of Trading

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ElliottwaveLive is not an investment advisory service or broker dealer. None of its contributors are registered investment advisors, licensed stock brokers or CTA's. The author may hold short term and long term positions in the futures, stocks and ETF's discussed herein. The author may also trade around those positions which may be in direct conflict with your positions. Complete trade disclosures of the contributor’s holdings are posted at www.elliottwavelive.blogspot.com. See Trader Disclosure. 

Trade at your own risk. The blog site, Newsletter and all other information, material and content accessible from this Site (collectively, the "Content")  provided herein provides the context for market analysis with respect to a market's, a security or a commodity's general position utilizing the Elliott Wave Principle. The Content contained herein are the opinion and general comments of the author and is based upon information that Mr. Sinibaldi considers reliable but neither ElliottWaveLive nor he warrants it's completeness or accuracy and it should not be relied upon as such. Mr. Sinibaldi or ElliottWaveLive (collectively, referred to as “EWL”) are not under any obligation to update or correct any content provided on this website. Any statements and or opinions are subject to change without notice. The content and comments contained herein neither purports nor intends to be, specific trading advice. It has been prepared without regard to any particular person's investment objectives, financial situation and particular needs. Information should not be considered as an offer or enticement to buy, sell or trade. 

A more and comprehensive Risk Disclaimer and Disclosure Statements is available within the left margin of this blogsite.   

======================================================================

Fair Disclosure Notice: I do not have a position in any of the aforementioned futures markets or securities related to this article. 

Bed Bath & Beyond

Volume Scans Identify Potential Winners / Losers

Stock scanners are nothing new to most of us yet many investors don't know how to effectively use them. 

On the the basic tenants of the Elliott Wave Principle, is wave personality.  One criteria that you should become familiar with is "volume signatures" that are associated with both impulsive and corrective structures. 

Using Volume Scans

When applying the wave principle, I like to run volume scans using three sets of criteria:

1) Daily Volume Greater than 50% - I use this scan to identify stocks that may exhibit bullish/bearish 1st waves. 

2) Daily Volume Greater than 200% -  I use this scan to identify stocks that may exhibit bullish/bearish 3rd waves. 

3) Weekly Volume Greater than 50% - I use this scan to monitor institutional support or lack thereof for stocks. 

Volume Scan - 9/18/2012

Bed Bath & Beyond Inc. (NASDAQ: BBBY) is a chain of domestic merchandise retail stores. The stock showed up in a scan for stocks showing daily volume greater than 200%.

Accordingly, I'm looking for 3rd wave price action.  

On August 19, 2012, Bed Bath and Beyond Inc. reported earnings of 98 cents per share for the period ended Aug. 25. That fell short of the $1.03 per share that analysts surveyed by FactSet expected.

Shares of Bed Bath and Beyond dropped sharply in premarket trading on Thursday, August 20, 2012 as the housewares company's second-quarter earnings disappointed and it provided a weak third-quarter forecast.

As you can see from the chart that the handwriting was already on the wall as the corrective phase from 6/26/2012 to 9/17/2012 appears to be complete. The high volume signature on 9/18/2012 had this stock on my watch list as a candidate that should exhibit further downside pressure. 

At the weekly chart level, the decline from 6/29/2012 began after what appears to be an ending diagonal which typically warns of a very swift reversal. That's exactly what transpired. 

As of the time of this post, price action appears to exhibit the personality of a third wave which is being confirmed by the acceleration of price to the downside. If my assessment and use of volume signatures is correct, price should fall well below $58.77. 

Reading the Chart

Should the wave pattern prove to be only a corrective three waves, then  I'm looking for a move to $54.54 with much greater potential to the downside should a five wave decline play out.

In conclusion, I hope that readers can see how I use volume scans to identify possible trades. before the larger move occurs. 

Best of Trading  

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ElliottwaveLive is not an investment advisory service or broker dealer. None of its contributors are registered investment advisors, licensed stock brokers or CTA's. The author may hold short term and long term positions in the futures, stocks and ETF's discussed herein. The author may also trade around those positions which may be in direct conflict with your positions. Complete trade disclosures of the contributor’s holdings are posted at www.elliottwavelive.blogspot.com. See Trader Disclosure. 

Trade at your own risk. The blog site, Newsletter and all other information, material and content accessible from this Site (collectively, the "Content")  provided herein provides the context for market analysis with respect to a market's, a security or a commodity's general position utilizing the Elliott Wave Principle. The Content contained herein are the opinion and general comments of the author and is based upon information that Mr. Sinibaldi considers reliable but neither ElliottWaveLive nor he warrants it's completeness or accuracy and it should not be relied upon as such. Mr. Sinibaldi or ElliottWaveLive (collectively, referred to as “EWL”) are not under any obligation to update or correct any content provided on this website. Any statements and or opinions are subject to change without notice. The content and comments contained herein neither purports nor intends to be, specific trading advice. It has been prepared without regard to any particular person's investment objectives, financial situation and particular needs. Information should not be considered as an offer or enticement to buy, sell or trade. 

A more and comprehensive Risk Disclaimer and Disclosure Statements is available within the left margin of this blog site.   

======================================================================

Fair Disclosure Notice: I do not have a position in any of the aforementioned futures markets or securities related to this article.     

Coffee Update and a Review of Wave Personality

After a volatile month of July, a review of the the decline from 192.2 has not yet proven itself. One could come to the conclusion that this market remains under pressure and you would probably be correct in your assessment. To what extent?

If the pressure truly remains to the downside and 150.10 will be surrendered, price action over the next two trading days must exhibit the personality of a third wave move.

From the 240 min chart, I have labeled what type of price action represents a third wave move AND what would not constitute one. In a third wave, we should see several days of heavy selling as price extends to the downside in long bars. This would bolster my labeling and my interpretation offered in my personal trade plan.You can read more about that trade plan at :  Elliott Wave Live: Coffee Anyone?

If we don't start seeing this market extend and see what I have described as "Not This", the possibility exists that either the bottom is already in or a more complex corrective move may be unfolding.

In conclusion, the correct use of Elliott Wave balances price with wave personality (structure). So make sure that you apply the applicable rule of wave personality to your wave labeling efforts. You'll see better results!

I hope you found this education tip helpful and...

Best of Trading


======================================================================

ElliottwaveLive is not an investment advisory service or broker dealer. None of its contributors are registered investment advisors, licensed stock brokers or CTA's. The author may hold short term and long term positions in the futures, stocks and ETF's discussed herein. The author may also trade around those positions which may be in direct conflict with your positions. Complete trade disclosures of the contributor’s holdings are posted at www.elliottwavelive.blogspot.com. See Trader Disclosure. 

Trade at your own risk. The blog site, Newsletter and all other information, material and content accessible from this Site (collectively, the "Content")  provided herein provides the context for market analysis with respect to a market's, a security or a commodity's general position utilizing the Elliott Wave Principle. The Content contained herein are the opinion and general comments of the author and is based upon information that Mr. Sinibaldi considers reliable but neither ElliottWaveLive nor he warrants it's completeness or accuracy and it should not be relied upon as such. Mr. Sinibaldi or ElliottWaveLive (collectively, referred to as “EWL”) are not under any obligation to update or correct any content provided on this website. Any statements and or opinions are subject to change without notice. The content and comments contained herein neither purports nor intends to be, specific trading advice. It has been prepared without regard to any particular person's investment objectives, financial situation and particular needs. Information should not be considered as an offer or enticement to buy, sell or trade. 

A more and comprehensive Risk Disclaimer and Disclosure Statements is available within the left margin of this blog site.