Elliot wave theory

Stock Predictions based on Elliot Wave Theory

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Elliot Wave Theory : What does it mean ?

The Elliot Wave Principle is based on a repeating 8-wave cycle, and each cycle is made up of similar shorter-term cycles

These waves have a rhythmic pattern and these patterns can be used to predict future prices of stocks and predict trends of the market.

These waves move with investor psychology i.e. waves show an upward trend when crowd is positive and too much positivity leads to a downward trend in the wave.


Elliot Wave Theory : What does it mean ?

This is the pictorial representation of the Elliot Wave Theory. 1, 3, and 5 are impulses, and waves 2 and 4 are smaller retraces of waves 1 and 3. Corrective waves subdivide into 3 smaller-degree waves;5-A,A-B and B-C. Please see that any move can be seen as one complete Elliot Wave Cycle.


Elliot wave Theory and Stock Correlation

We hold stocks in this phase

We sell stocks in this phase


What we do ???

Identification of Stocks that may follow the Elliot Wave Theory

Invest the money in those stocks when the upward trend of these stocks start

Booking of Profit when the downward trend in those stocks start.

The upward and downward trend of these stocks are estimated on the base of the stock charts ,total market capitalization of the stock and the general public interest for that particular stock.

Software used to estimate these breakpoints is Metastock and other factors taken into account are fibonacci and moving averages.

Two examples where there theory appears to be working are shown in the following slides.


Rupee to Dollar Curve

From April 2008 to April 2010 , the INR/dollar value moved from 39 to 52 and came back to stabilize around 46 level. As we can see the pattern exactly follows the wave pattern described by Elliot Wave Theory.


SBI’s price prediction

SBI completed one complete wave between the two encircled points. It went from 1000 to 3500 levels based on the upward trend of the Elliot wave theory. Now SBI appears to have completed a 3 wave correction pattern and came down to 1900 levels to complete the correction. It may begin new uptrend very soon according to Elliot Wave theory. If it would have gone beyond 1500 levels this theory would not have complied on this stock. But the pattern worked and we see an upward trend in SBI again and it seems that this stock is one of options to invest money and book profit.


Reasons why Indian Stock Market should do well …

Only 8% of Indians invest in stocks and for any country to reach the pinnacle in terms of development, the companies need to grow and for that more and more people (apart from the company themselves) need to invest which would result in more cash intake for the stock market and which could pump the stock market growth from strength to strength.

In the last 6 years the market has gone up to 21000 level once and again stabalised to about 16000 levels where as our GDP growth is in double digits each year.So this means that the stock market still needs to correct itself based on the differnence in GDP growth and inflation which is roughly around 23000 to 24000 level and if it is to happen the bull trend can be predicted pretty soon for the Indian Stock Market.

Gold and real estate are really over priced at this point in time and people are starting to look for other options to invest which appears to be stocks and with increase in literacy rate of the country the stock options are becoming more and more prospective for the upcoming investors.


For further assistance:Gaurav Verma21G Investmentshttp://www.facebook.com/pages/21G-Investments/353301421363897

Do You Have Any Questions?


Disclaimer:

The slides are for educational purpose only and these are my personal views which can be right or wrong. The predictions are 75 -80% correct and it involves lot of patience to mint money through these predictions.

Not all stocks follow patterns of Elliot Wave Theory.

Elliot wave theory

Economy & Finance

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