Another Elliott Wave Trade in ES

August 10, 2010 · Posted in ABC Bullish, Elliott Wave · Comments Off on Another Elliott Wave Trade in ES 

I am finding EW trades more now… This may force me to go back and study Elliott Waves all over again :) I do like when they work intraday, so I can quickly evaluate if my thesis is correct.

Today ES started to sell-off at the open and started to form 0-1-2 setup (ABC) around the mid Fib. Band. This is usually not my typical trade since the pattern formation is around the mid Fib. Bands not near the extreme bands. Anyway, around 10.45am, price formed a small ABC (0-1-2) and traded above mid Fib. Band. This has given me the first clue that it may be the seed-wave (0-1-2) of EW pattern. I quickly started to plot potential Wave 3 range. I suspected the W3 may be between 1123 (127% of 0-1) and 1124.5 (162% of 0-1) setup. About 11.45pm, Price traded at 1124.5 (162%) and started to retrace to the mid Fib. Band (also at 100% of 0-1). Now I was confident that if price starts to rise, it will at least see between 1125 (0.62 of 2-3) and 1127 (0.76 of 2-3) for Wave 5. Just about 3pm, price traded at 1127 and finished Wave 5.

In my view, EWs are hard to detect and very rarely they are easy to spot with naked eyes. But when they do work as today, they really show the power of Elliott Waves and Fibonacci Ratios.

Trading Elliott Wave using ABC Pattern

July 29, 2010 · Posted in ABC Bullish, Elliott Wave, Market Structures · Comments Off on Trading Elliott Wave using ABC Pattern 

It is never easy to detect an Elliott Wave Pattern. Every EW theorist has his own rules. Usually it is NOT my style of trading EW as I am not actively looking for it. Many many years ago, I got interested in developing EW program for TradeStation and I learnt for few months of its build, various rules and its nuances. Coding was a new challenge as it constantly adjusts and re-adjusts with various arcane rules. This process took about 6 months for me to understand and code various rules, but finally realized I may never be able to completely write the EW algorithm to my satisfaction. Hence, I abandoned the EW project but I learnt quite a few patterns in the process. Even though I do not look for EW actively, time to time, I do find the EW waves and I trade them from ABC perspective. Today was such a day in ES 1220 Tick chart… Here is how it worked out as I initially traded only ABC pattern.

Today ES Sold off from the high of 1112.5 to 1088 by noon. Most serious drops have some retracements as Counter Trend moves. The first bounce from low was at 1088 to 1094 area (6 pts) signaling potential AB leg in the ABC pattern. The retracement (BC) leg was about 4 points to 1090 area with 76% AB length. See EW01 figure. Note Pivot (A) was also marked as ‘Market Structure Low’. Having (A) or (B) or (C) as Market Structures adds additional confirmation for the ABC Pattern. The entry trigger into the ABC was at 1092.75 with targets between 1095.25 and 1096.75. A Stop loss is set at 1090 level (C). Once the AB reached its targets (See Fig. EW03), I was thinking it may see its reversal at 1.62AB level (1098.5). Then it also occured to me that this may be an Elliott Wave pattern with Wave3 (start at 1090 and ending at 1098.5).

Around 1.30pm ES reached its 1.62AB Target (1098.5) and start to reverse. Now, for EW to continue its formation, the 4th wave should end above 1094 level (B). About 2.11pm, the 4th Wave formed just above (B). See EW5 image. Now EW should form 5th wave from 1094.5 level to (1102.75-1104.25 which is 76-100% of Wave3 range. See EW06 image.

The obvious question is what next? Once Elliott Wave completes its 5-wave, it is supposed to reverse and form A, B, C waves and retest the high of 1 low of wave 4 to form Elliott Wave downwards.

Elliott Wave using ABC Bullish Pattern