Click the link below to review this article with images and links to more information.
http://invest2success.blogspot.com/2011/06/is-stock-market-selling-over-...
Are you still a bull after this 6 week selloff? Do you think the markets oversold, and it’s time to start buying again? Do you think the selling is over with? Or do you think the selling has just begun and may continue?
The Dow SP500 and Nasdaq
Chance favors the prepared mind so this week, I don’t have a specific stock pick to buy or sell but index analysis to see the big picture of the markets possible future direction, because for the most part, most stocks follow the broad market. So much for fundamental analysis huh.
Big Wave Riding
Notice the index charts below. Notice the recent 1 2 3 on the charts. These are Elliott Wave patterns. Important Note: The analysis in this article are Minor Waves. There are also longer term intermediate and major waves. Elliott Wave analysis is based on the following. The Wave Principle is governed by man’s social nature, and since he has such a nature, its expression generates forms. As the forms are repetitive, they have predictive value.
The 3rd Wave Is Like a Profit Tsunami If Your Right
3rd waves of the 5 wave Elliott Wave sequence are the strongest, longest, most profitable, and if you’re going against them, have the ability to wipe out your account very quickly. God help you going against a 3rd wave in either direction. 3rd waves are so strong, you never know when they’re over until they have shown the 4th wave. Riding 3rd wave trends in either direction can put more money in your account faster than most other trading methods with the lowest risk and highest reward. 3rd waves are the truest “the trend is your friend”.
Where’s the Support Now?
Notice the charts again. Notice how the index prices have touched or surpassed the orange support areas. Notice the light blue, and dark green support areas on the charts. Remember 3rd waves are the strongest and longest in the Elliott Wave sequence. Where do you think support will be once the 3rd wave is done? Is it where prices are right now in the orange areas or is it lower in the light blue or dark green areas? Notice the STF indicator. The STF is showing the indicator below and outside its normal band line range. As long the STF indicator is below the lower band line of its normal range shown, consider the downtrend intact and prices going lower. If the STF indicator moves above the lower band line, a reversal may be in the works heading up into a 4th wave. Once the 4th wave is formed, then prices should normally head back down into an ending 5th wave which can be one point to many points above or in this case below Wave 3.
Fast Profiting from 5th Wave Completions
Normally once the 5th wave is complete, it normally retraces most all of the advance or decline in this case, to about the area where Wave 1 was formed. After that the market could move up or go back into a reversal again and head downward again. In my opinion, I’m looking for a longer term downtrend for various reasons. Once this 5th wave downtrend is complete, normally the potential exists for a low-risk high-reward buy long for a quick short term pop. I do it all the time with forex on 15 minute chart day trades and sometimes 1 hour chart swing trades. In short ending 5th waves can provide quick fast profitable reversal moves, providing you can successfully analyze a 5th wave ending. Analyzing Elliott Waves manually is one way, but using Elliott Wave trading software is much easier in my experience where you can cross check everything quickly with the help of other confirming indicators.
Elliott Wave Analysis or Other
Whether you believe in the Elliott Wave trading investing method or not, one look at these charts can still tell you a lot. There has been a downtrend for the last 6 weeks. The “sell in May and go away” cliché came true this year again. When and where is support now for buying long? Or when and where is it a good time to short-sell if you want to? How can you profit with as lowest risk and highest reward as possible? My analysis above will help you with those questions. I’ll leave the final analysis up to you since it’s your money, and provide you some additional Elliott Wave analysis links at the bottom of the page for your review.
Click the chart images for a larger view.
DJIA Chart
DJIA Support – Current Price and 11662.24 to 11623.50 and 11138.68 to 11129.64
SP500 Chart
SP500 Support – Current Price and 1257.28 to 1253.87 and 1212.15 to 1209.60
Nasdaq Chart
Nasdaq Support – Current Price and 2492.18 to 2479.61 and 2384.10 to 2371.53
Click here for more Elliott Wave resources.
Click here for Elliot Wave Trading Software