10 Elliott Wave Traders Share Market Experience and Lessons on This 70+ Year Theory

We had a team of 10 Elliot Wave enthusiasts and traders get together to discuss how they have modified and apply this theory to the markets. Often confusing to new traders this team helps break it down.

Michael Bozzello
The Stocktwits Blog

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ElliottWave-Forecast has built their reputation on accurate technical analysis and a winning attitude. By successfully incorporating the Elliott Wave Theory with Market Correlation, Cycles, Swing sequences and Proprietary Pivot System, they provide precise forecasts with up-to-date analysis for 78 instruments including Forex, Commodities, ZN, World Indices, Stocks and ETFs. The Team is led by Eric Morera, who is the founder and CEO of Elliottwave-forecast.com. He began his Professional career in early 2000 as a fund Manager with Gain Capital using pure Technical Analysis. Eric founded Elliottwave-Forecast in 2005 and since then has developed many new ideas and concepts about the Elliott wave Theory to try and overcome the subjective nature of the theory. It is reflected in his work and other team members work at Elliottwave-Forecast.Com and it’s changing the way the World looks at the Theory.What follows is a recap of the Q&A. For the full transcript please GO HERE.

@ElliottwaveForecast

Oil prices are little bit going up but today some companies like $WFT and $PDS are going down. Comments? — Rigman77

$WFT $PDS is still within the cycle from 2014 peak so its lagging the move as Oil and rest of Energy stock already ended it. $WFT $PDS Both reached 100% extension from 2011 peak which means there should be at least 3 larger waves bounce coming next year.

What are your thoughts on $RIOT blockchain tech? Boom or bust? — Anorried

$RIOT Seems to be in the early stage of a larger bounce taking place since the decline from 2007 peak. $RIOT While November low is holding then it can keep extending higher toward $23- $31 before 3 waves pullback is seen.

Are we at the final stages of the bull market yet? — HenryK81

No! We believe market has more upside. However, we are at final stage of ending cycle from February 2016 low Therefore, soon we can soon see a correction of cycle from February 2016 low but that should be another buying opportunity. We did a Free seminar on our long-term view of World Indices which you can check out here. In that Free Seminar, we explained why we still see more upside in the cycle from 2009 low.

Is this Bull run fading or just diverging into its next run for 2018 and Is Tech done? — Vegas87

We believe market would be ending a cycle from February 2016 lows soon, some World Indices have already rolled over While others will do so soon. We can see most Indices & sectors correcting in 2018, but they should then continue higher after that. Some of the tech stocks already ended 2016 cycle like $AMD, $NVDA$, MU and started a correction Again, the correction in Techs would be another buying opportunity possibly in 2018. However, the main leading stocks like $AAPL $MSFT $GOOG are still expected to finish with a last leg higher into new all time highs before starting 3 waves pullback early in 2018. Here is an article explaining $AAPL case.

Can you break down what is Elliottwave theory/how it works, what are the drawbacks and most important to remember? — michaelbozzello

Elliott Wave Theory was developed in 1930’s by Ralph Nelson Elliott to forecast moves in the stock market. You can learn more about Elliott Wave Theory over here. It works based on crowd behavior that crowd will behave in the same manner given same set of conditions. As history repeats itself, conditions in the market are also repeated and hence repetitive price patterns are created. The price patterns in Elliott Wave Theory could be either impulsive or corrective. Major drawback is that most traders use only impulsive sequences (5 waves in direction of trend and 3 waves again). However, market can trend in impulsive (5 and 3) or corrective (3 and 3) sequences. Important things to remember in an Impulsive sequence are: Wave 2 can’t retrace more than 100% of wave 1 Wave 3 can’t be the shortest wave in the sequence. Wave 4 can’t overlap into territory of wave 1 unless a diagonal Wave 5 should show momentum divergence with respect to wave 3 and that corrective sequences end without momentum divergence. Also, you need to remember that markets can trend in both Impulsive and Corrective sequences.

Is this the ABC pause for Paypal? How should one proceed long? — EWavePlayer

$PYPL Already did 3 waves from 11/27 peak and bounced from 100% fib ext. It still needs to break higher otherwise it will open more correction to the downside toward $60 -$54 correcting 2016 cycle.

Hey! $AGN C 15JUN18 175.00Strike….Are you in? or are you in? — JamyJar

$AGN Has a daily bearish sequence from 2015 peak calling for more downside toward $101 — $64 area. Short term it reached 61.8–76.4 fib ext area $160 — $138 where 3 waves bounce can be seen before lower again.

Do you have a link to check elliott wave calculations by providing user input for stock symbol? — livestreet

We do all our wave counts manually because we use other tools like cycles , pivots , distribution system beside.

Once again any opinions to diverse in the upcoming market? — rjmelendez6

Investing in Mining & Energy stocks is a good option for the next few months into the new year. Commodities have been weak for last few years due to Indices rally and we have seen healthy corrections of cycles from all time lows already. So buying commodities like Gold, Silver and Platinum is also another way to to diversify.

Where is AMD headed the next few weeks? — success101

$AMD ended the cycle from 2015 so correction would extend later on toward $8.63 — $6.98 area. This is how we saw it on back in October and the stock is still weak.

What do you think of this? — John_West

We don’t agree with this analysis. We don’t see the move from all time low to be a 5 waves move. We view $SPX move from all time lows to be a a huge 3 waves move which in case of $SPX has reached minimum target. However, minimum target in other World Indices like Hangseng has not been reached yet & hence we expect more upside in $SPX. Also, Please see our Long-term view on World Indices over here.

It’s easy to build pivot points, fibo lines & other indicators into algos. Have you done similar with your waves? — patrickrooney

We believe in the idea of HFT and have incorporated that into our forecasting and trading. We tried to automate our forecasting system but have not had much luck with it so far as it’s a lot more complex.

Have you had success trading or charting cryptocurrencies? What are your thoughts on their price action? — scheplick

Yes we’ve been charting Bitcoin since last year calling the move higher and providing buying area during pullbacks which is far from over that’s why more extension will be seen in the future around. Here is an article explaining a potential buying opportunity in $BTCUSD back in July.

Cardona ADA Buy or run? — tsacko23

If you’re talking about cardano coin then there is not enough data to identify a clear structure for now.

What are thoughts Blockchain and the Bitcoin currency? Future or Fad? — BenJaminit

We think of #Bitcoin as another alternative currency which is in the early stage of establishing itself.

What is your psychology of trading/investing? — Packbacker77

Our Psychology of Trading / Investing is Winning or Misery. To hold the position until it hits the stop or reaches target. Also, always using the same technique to enter & exit the market with constant risk, let’s say 2% of equity. No one is perfect so a good money management and same criteria helps to become successful.

What do you see happening with banks, in particular BAC? — DebD

Financial sector will be ending 5 waves advance from 2015 for $XLF 2016 for $BAC so we expect a 3 waves correction early in 2018. $BAC a pullback toward $23 — $20 area can be seen next year correcting rally from 2016 low before resuming rally again.

How often do actual results clearly fracture the model? Do you use other TA to confirm an interpretation? — bearcharts

Nothing is perfect, but as far as we choose the right instruments and apply every thing perfectly we can get a higher success rate closer to 70% which drops the fracture rate to around 30%. Yes, we noticed that Elliott wave is not enough as a tool to forecast and trade the market. So we use other tools like cycles, sequences, market correlation and distribution system to confirm our interpretations!

What’s your favorite sell signal? — bxvets

We only trade in direction of the trend which means we don’t picks tops / bottoms against the trend and only buy or sell in direction of the trend and when there is a clear incomplete sequence within the correction. Our favorite setup is when a market is showing clear 5 swings in direction of the trend, we like to buy/sell 6th swing to trade the 7th swing.

How did you get into trading, and learn how to successfully trade in the stock market. — eth2058

We are a team of analysts so we will only mention about our founder and CEO here. He has several engineering degrees and was always was intrigued by markets and trading. He started learning about Elliott wave theory and practiced it. Then he noticed that noticed that Elliott Wave Theory had draw backs and was not enough to be used as a forecasting / trading tool That’s when he he started developing other tools to be used with Elliott Wave analysis to increase forecast/trading accuracy.

Thoughts on what the futures market impact will be on BTC and GBTC? — fullledger

BTC Futures will bring more money into the table & it will fuel any related instrument like $GBTC to extend higher.

How many waves before final peak is reached followed by subsequent 50% collapse. All time frames. — TradeReversal

We are not sure which stock market are you referring to. If you are referring to SPX, then we believe, SPX cycle from 2009 low is still alive and has not yet reached the target. Other World Indices like Hangseng, for example, also not reached target from 2009 low yet. We believe $SPX cycle from 2009 low is ending, it can result in a pull back in 2018 before more upside towards 3200 area Then, we don’t know whether it would do a 50% correction but should pull back and correct cycle from 2009 low at least.

Where are semiconductors/ Technology stocks headed? — roshanjf

Semiconductors & Technology stocks can be recapped by checking $SMH & $XLK which have the cycle from 2015 low reached extreme area. We are expecting a correction to take place in the coming 2 months which will represent another buying opportunity. You can refer to this article about $AAPL explaining the move.

Any suggestions/advice to new traders looking to spend time learning things going in the right direction? — BoostedBullish

Learn a solid technique of trading, always use the same criteria for entry and exit and use same risk on all trades for example 2% of the equity. Understanding weakness and strengths as individuals will give you great insights into where you are as a trader and where you need to be.

I wanted to also ask, what is the most common mistake made in applying EW that you see too? — michaelbozzello

Lack of understanding from traders that times have changed since the theory was discovered and most forecasters still try to continue to force idea of 5 waves & not realizing that markets can trend in both 5 waves & 3 waves sequences Regardless of how the market trends, at the end every 5 waves move will also end up becoming a higher degree 3 waves move.

What is your read on $CYCC? — RRoyce

$CYCC is similar to many biotech stocks that saw a huge drop in price and just sitting around the lows. It could be in the early stage of building a bottom to start bouncing but the structure for now is still bearish.

With penny stocks do you notice any charting tendencies that are more common then with larger companies? — ConsciousShock

We don’t follow Penny stocks but we believe every financial instrument in the market is following the same algorithm. So no matter which instrument you trade it will always respect the technical analysis and structures.

Is AMAT too broadly positioned to benefit from the current market in the short term(6 months)? — STOCKTWITS99

$AMAT Is like $SMH ended the cycle from 2015 low and started a correction which can take it back toward $43 — $37. Can see buyers next year around $43 — $37 area for at least 3 waves bounce.

Copper Analysis? — EdHolmes

$HG_F Copper ended cycle from 2011 peak and now it’s showing an incomplete sequence from 2016 low. While above TL, we are looking for 3.364–3.577 area to end cycle from 2016 low. Then $HG_F Copper should pull back to correct cycle from 2016 low and higher. Above 3.921 will open more ext.

Would you advise amateur stock traders to stay from cryptocurrencies because of volatility? — richi

If you have a good trading system and strict money management then you can trade any market around the world. #Cryptocurrencies is just another financial instrument and volatility won’t affect you if you stick to your Plan. It’s all about risk management, if you handle it the right way then you’ll succeed. Watch this free seminar that we did about risk management as it can help you a lot.

Do you set limit orders? How do you time your entry? Do you have a signal confirmation you look at? — coverthecall

Yes, we always use limit or stop orders to enter the market. As far as timing is concerned, we determine the entry area based on the sequence of 3, 7 or 11 swings. Yes, we look at momentum indicator for confirmation of our entries.

Do you use the Elliot Wave on other markets besides financial? Seems most info online refers to financial use. — Nirbush

Yes, Elliott wave can be used on other markets as well. In the past, our founder has applied it to the Cuban regime. There are indirect applications also of Elliott Wave in other markets for example $DJUSRE could be used by a Property investor to time the next big purchases by checking when $DJUSRE has made a pull back and ready for next leg higher.

We hope you enjoyed this Q&A! Press the 👏 below if you really liked it and feel free to highlight or comment on any part. We also have a newsletter for anyone interested in getting daily updates about the stock market.

I am the Community Manager for StockTwits. Follow me @michaelbozzello.

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Product Manager @StockTwits | Personal trader for 15+ years | It takes passion from great people to build great products