Technical Analysis - Elliot Wave Theory

1. ELLIOT WAVE THEORY
By : Sohil Kumar

2. WHERE DID THE WAVE THEORY COME FROM?
Ralph Nelson Elliott is the father of the Wave Theory, which is
commonly called and more accurately described as the Elliott
Wave Principle. Born on July 28, 1871 in Marysville, Kansas,
Elliott reached his ultimate achievement late in life by a
circuitous route .
Elliott examined yearly, monthly, weekly, daily, hourly and half-
hourly charts of the various indexes covering 75 years of stock
market behavior. By November 1934, R.N. Elliott's confidence
in his ideas of what is sometimes called the Wave Theory had
developed to the point that he presented them to Charles J.
Collins of Investment Counsel, Inc. in Detroit.
During the early 1940s, the Wave Theory continued to
develop. Elliott tied the patterns of collective human behavior
to the Fibonacci, or "golden" ratio, a mathematical
phenomenon known for millennia as one of nature's
ubiquitous laws of form and progress.

3. WHAT IS THE ELLIOTT WAVE PRINCIPLE?
• The Elliott Wave Principle is a detailed description of how groups of people behave. It reveals
that mass psychology swings from pessimism to optimism and back in a natural sequence,
creating specific and measurable patterns.
• These patterns can be seen in long-term as well as in short-term charts. Ideally, smaller
patterns can be identified within bigger patterns. In this sense, Elliott Waves are like a piece
of broccoli, where the smaller piece, if broken off from the bigger piece, does, in fact, look
like the big piece.

4. IMPULSIVE WAVES
• Consists of 5 waves
• Either upward
or downward
Trending

5. CORRECTIVE WAVE
• Corrections are very hard to master.
• Most Elliott traders make money in the impulsive ones and lose it in the
corrective ones
• 2 types :-
A) Simple Correction
B) Complex Correction

6. SIMPLE CORRECTION
• 3 way pattern

7. SIMPLE ZIG ZAG CORRECTION
A) There is only one pattern in a simple correction. This
pattern is called a Zig-Zag correction. A Zig-Zag
correction is a three-wave pattern where the Wave B
does not retrace more than 75 percent of Wave A. Wave
C will make new lows below the end of Wave A. The
Wave A of a Zig-Zag correction always has a five-wave
pattern. In the other two types of corrections (Flat and
Irregular), Wave A has a three-wave pattern. Thus, if you
can identify a five-wave pattern inside Wave A of any
correction, you can then expect the correction to turn
out as a Zig-Zag formation.

8. FLAT CORRECTION
In a Flat correction, the length of each wave is
identical. After a five-wave impulse pattern, the
market drops in Wave A. It then rallies in a Wave B to
the previous high. Finally, the market drops one last
time in Wave C to the previous Wave A low.

9. IRREGULAR CORRECTION

10. TRIANGLE CORRECTION
•
In addition to the three-wave correction patterns,
there is another pattern that appears time and time
again. It is called the Triangle pattern. Unlike other
triangle studies, the Elliott Wave Triangle approach
designates five sub-waves of a triangle as A, B, C, D
and E in sequence.

11. FIBONACCI RETRACEMENT
• Fibonacci retracement is a very popular tool among technical traders and is based on the
key numbers identified by mathematician Leonardo Fibonacci in the thirteenth century.
However, Fibonacci's sequence of numbers is not as important as the mathematical
relationships, expressed as ratios, between the numbers in the series.
Investopedia http://www.investopedia.com/ask/answers/05/fibonacciretracement.asp#ixzz4
ZCPiOx2k

12. THANK YOU