Elliott Wave Theory - Motive WavesElliott Wave Theory , developed by Ralph Nelson Elliott, proposes that the seemingly chaotic behaviour of the different financial markets isn’t actually chaotic. In fact the markets moves in predictable, repetitive cycles or waves and can be measured and forecast using Fibonacci numbers.
The very basics of Elliott Wave Theory ;
The Elliott wave principle at its core consists of motive waves, movement in the direction of the larger trend, and corrective waves, any correction against the main trend. Market prices alternate between a motive phase, and a corrective phase on all time scales of trend.
Wave analysis offers insights into trend dynamics and helps you understand price movements in a much deeper way and offers the trader a level of anticipation and/or prediction when searching for trading opportunities
Motive Waves
Motive waves in general can be categorized as Impulse and Diagonal waves
a- Impulse Waves
Impulse waves consist of five sub-waves in the same direction as the trend of one larger degree.
Elliott proposed that financial price trends, the waves, are created by investor psychology or sentiment and the waves can be measured and forecast using Fibonacci numbers . In adition to using fibonacci retracments and extetion to forcast probable targets, channeling technique is also presented, where channeling technique is used to forecast wave formations and targets using price action .
Disclaimer: besides the rules, the below presented figures displays guidelines that elliott waves may form. Guidelines are tendencies, not set in stone rules
b- Diagonal Waves (Wedges)
Another form of motive waves are diagonals, they appear in the beginning of a larger trend, called leading diagonal and at the end of the larger trend, called ending diagonal
They are five-wave structures in the direction of the main trend within which wave 4 almost always moves into the price territory of (overlaps) wave 1, breaking the rule of impulse motive wave
Diagonals take a wedge shape within two converging lines
Elliott was careful to note that these patterns do not provide any kind of certainty about future price movement, but rather, serve in helping to order the probabilities for future market action. They can be used in conjunction with other forms of technical and fundamental analysis, including technical indicators, to identify specific opportunities.
Technical Indicators
Using various technical indicators among elliott wave practitioners is not so common, except few, probably the common one used is a kind of momentum indicator, such as RSI or MACD , to detect divergencies
Fibonacci retracement and extension drawing tools are essential for elliott wave practitioners. In todays computerized era many of the darawing tool's auto indicator versions are availabe on the trading platforms, such as Auto Fib ( where and how tp apply )
Elliott Wave Oscillator ( EWO ) , is inspired by the Elliott Wave principle and helps counting the waves
Volume and Volume Profile ( Vol / Vol Profile ) combined with price action is esential in technical anlaysis and for elliott wave practitioners helps to identify impulse and correction phases
Other indicators that are referred among elliott wave practitioners
Pitchforks ( how to apply ), Pitchfans , FibFans ( how to apply ), FibChannels ( how to apply ), FibTime , LinReg Channel ( what it is ), Raff Regression Channel ( what it is ), etc
Motive-wave
IBEX35's NEW CYCLEHi Traders!
This is my analysis on IBEX35.
I think we are already going up for a new cycle, actually we are going for the third wave in it!
I studied the possibility of a longer correction but the shape of the chart does not match with any of the most important complex patterns for corrective moves, so I got to this conclusion.
We are looking now on smaller timeframes for buy set ups!
Carlos
Two reasons to consider the USDCAD in downtrend.Two reasons to consider the USDCAD in downtrend.
1. This is last wave (Elliot Wave 5) of Basic Motive Phase.
2. Then here begin a first wave (Elliot Wave A) of Corrective Phase.
3. This is second wave (Elliot Wave B) of Corrective Phase.
Note: This wave have inside two Elliot Wave.
a) Bull Market Truncation (Red Color and Completed)
b) Elliot Wave Basic (Blue Color and not Completed)
4. This is corrective wave (Elliot Wave B) of Corrective Phase.
Note: This corrective wave has already started, missing the wave B (Uptrend) and C (Downtrend).
This is the SECOND reason to consider that the price will be BEARISH.
5. This is last wave (Elliot Wave C) of Corrective Phase.
This is the FIRST reason to consider that the price will be BEARISH.
EURCAD : Correction May Be Over; Pair Could Reach Lower LevelsOn the 4h chart of EURCAD, we see that price was trading in a correction, because of a slow and sloppy price action. That said price made a double zig-zag labeled as red waves w-x-y. We think that correction might be over because of a sharp fall to the downside labeled as red wave i-circled. A recent pullback to 1.4984 could be red wave ii-circled, and now we may see price reach lower levels in red wave iii in days ahead.
A double zig-zag is a correction, a complex pattern structured by seven swings. It's actually a combination of two simple zig-zags. The difference is that usually double zig-zag will make deeper retracement and be longer in time compared to only one simple zig-zag. Two zig-zags are separated by wave x.
www.ew-forecast.com
AUDUSD Remains BearishWe see AUDUSD moving sideways around 0.7300 level, which we see as a temporary pause within ongoing downtrend. Keep in mind that we are tracking blue wave 5-circled, which is a motive wave, so we need five waves down from 0.8160. That said we expect new low soon, probably around 0.7000.
www.ew-forecast.com
USDTRY : Final Wave Within UptrendDollar is bullish when compared to Turkish Lira but we see move out from a triangle in wave (iv) as shown on the 2h chart, which means that uptrend can be in final stages to complete wave 5-circle on a daily chart. Ideally near 2.8800-2.9000. So for the short-term traders there can be still some room for longs after coming black subwave iv.
www.ew-forecast.com