1. Demystify Technical Analysis
Techncial Analysis

2. Agenda
 Trading Techniques
• Using RSI
• Using Moving Averages
• Using Stochastic .
• Using Bollinger Band
• Using Composite and Index performance
rebasing
• Using Seasonal Charting
 Elliot Wave .
• Basic Pattern.
• Motive and corrective Wave
• Complete Wave structure
• Wave degree
• Degree
• Trading Style
• View on the market
2 Technical Analysis

3. Trading Stratergy Using MA and RSI
3 Technical Analysis

4. Using MA Cross Over.
4 Technical Analysis

5. Using Stochastic for Jobbing/ Fast Trading.
5 Technical Analysis

6. Index Performace Rebasing ( Relative Strenth )
6 Technical Analysis

7. Index Performance / Rebalancing
7 Technical Analysis

8. Seasonal Charting
8 Technical Analysis

9. Elliot Wave
9 Technical Analysis

10. Basic Pattern
 Market moves in 5 waves.
 Directional Wave : Wave 1 , Wave 3 and Wave 5
 Countertrend Interruption : Wave 2 and Wave 4
10 Technical Analysis

11. Elliot Wave
 Developed by Ralph Nelson Elliot.
 “ Elliot wave does not predict the market. It just helps you to
understand in which state our Market is “
• Robert Prechter
 “ Elliot wave is idiot Wave.”
 “If you want to take revenge on your enemy teach him Elliot
Wave.”
 Vishal Mehta
11 Technical Analysis

12. Motive and Corrective Wave
 Motive Wave : Motive wave has the direction which impels
the market in one direction , the movement Motive Wave
comes in 5 wave structure .
 Corrective Wave : Corrective wave It has 3 wave structure .
12 Technical Analysis

13. Complete Wave cycle structure
13 Technical Analysis

14. Wave Degree
 WAVE DEGREE
 All waves may be categorized by relative size, or degree. Elliott discerned nine
degrees of waves, from the smallest wiggle on an hourly chart to the largest
wave he could assume existed from the data then available. He chose the
names listed below to label these degrees, from largest to smallest:
Grand Supercycle
Supercycle
Cycle
Primary
Intermediate
Minor
Minute
Minuette
Subminuette
14 Technical Analysis

15. Degree Notation Table
15 Technical Analysis

16. Impulse Pattern , How they are developed
 Wave 1 is usually weak rally with only small percentage of traders
participating .
 Once Wave 1 is over, they sell market on Wave 2 . The sell of Wave 2
is very vicious . Wave 2 will finally end without making new lows and
market will turnaround for another rally.
16 Technical Analysis

17. Wave 3
 Initial Stage of Wave 3 rally is slow and finally makes it to top of prvious rally
( Top of Wave 1 ) . Lots of Stops are placed above Wave 1 .
 Traders are not convienced about the upward trend and use this rally to add
more shorts .
 For their analysis Wave should not cross above previuos rally . So everybody
puts their stop loss above Wave 1 top.
17 Technical Analysis

18. Wave 3 in Progress
 Once top of Wave1 is taken out Wave picks up the steam.
 As top of Wave1 is breached lots of stops are taken out and
depending on the stops levels there would GAPS left. Ideally Gaps
are good indication of beginning of Wave 3 .
18 Technical Analysis

19. Wave 3 in Full Swing
 Trader who were long from the bottom has something to cheer about and add to their long
position.
 Traders who are unhappy being stopped out, decide the trend is up and starts going long .
This adds the fuel in Wave 3.
 CNBC, All analysts talk about good economic health and good Technical Picture.
19 Technical Analysis

20. Wave4
 Wave 3 buying dries and Wave 3 comes to halt. Profit taking now sets
in. Traders who were long from the lows and will decide to take profit.
Others traders start to lock in profit.
 This causes pull back is called Wave 4. Wave 2 is usually vicious sell
of . Wave 4 is gradual profit taking.
20 Technical Analysis

21. Wave 5
 Considering the gradual profit. People still consider the market trend is
up Buy in Wave 4 pullback.
 Wave 5 progress but lacks enthusiasm which was there in Wave 3.
 Ususally divergence is seen during wave 5.
21 Technical Analysis

22. Elliot Wave Rules
1. Wave 2 cannot retrace past the beginning of Wave 1.
2. Wave 3 cannot be shortest of 3 impulse waves (1,3 and 5)
3. Wave 3 cannot overlap or trade into territory of wave 1.
If any of theses rules are violated, the wave structure as
labeled is incorrect and must be reevaluated.
22 Technical Analysis

23. Elliot Wave Rules
23 Technical Analysis

24. Extension
 Extensions are elongated impulses with exaggerated subdivisions.
The vast majority of impulse waves do contain an extension in one
and only one of their three actionary subwaves.
24 Technical Analysis

25. Use of Extension
 If Wave1 and Wave3 are about equal size then Wave 5 would be extended.
 if wave three extends, the fifth should be simply constructed and resemble wave
one.
 In the stock market, the most commonly extended wave is wave 3.
25 Technical Analysis

26. How to find 5th wave Failure
 Early warning signals come for 5th wave failure when 4th Wave retraces
deep as much as 50% of Wave1-3 or extreme of Wave 1 .
 If Wave 5 subdivide its self in 5 wave before completing the Wave cycle
26 Technical Analysis

27. Truncation
 Elliott used the word "failure“ or “Truncation” to describe a
situation in which the fifth wave does not move beyond the
end of the third.
27 Technical Analysis

28. Diagonal Triangles
 An ending diagonal is a special type of wave that occurs primarily in the fifth wave position at times
when the preceding move has gone "too far too fast," as Elliott put it. A very small percentage of
ending diagonals appear in the C wave position of A-B-C formations.
 Ending diagonals take a wedge shape within two converging lines, with each subwave, including
waves 1, 3 and 5, subdividing into a "three," which is otherwise a corrective wave phenomenon.
28 Technical Analysis

29. Ending Diagonal
29 Technical Analysis

30. Corrective Waves
 Specific corrective patterns fall into four main categories:
 Zigzags (5-3-5; includes three types: single, double, and
triple);
 Flats (3-3-5; includes three types: regular, expanded, and
running);
 Triangles (3-3-3-3-3; four types: three of the contracting
variety (ascending, descending, and symmetrical) and one
of the expanding variety (reverse symmetrical);
 Double threes and triple threes (combined structures).
30 Technical Analysis

31. Zigzags (5-3-5)
 A single zigzag in a bull market is a simple three-wave declining pattern
labeled A-B-C. The subwave sequence is 5-3-5, and the top of wave B is
noticeably lower than the start of wave A.
 Wave B should come in 3 Waves and Wave A and Wave C comes in 5 Waves
31 Technical Analysis

32. Flats (3-3-5)
 A flat correction differs from a zigzag in that the subwave sequence is 3-3-5
 . Since the first actionary wave, wave A, lacks sufficient downward force to unfold into a full
five waves as it does in a zigzag, the B wave reaction, not surprisingly, seems to inherit this
lack of countertrend pressure and terminates near the start of wave A. Wave C, in turn,
generally terminates just slightly beyond the end of wave A rather than significantly beyond
as in zigzags.
32 Technical Analysis

33. ABC (3-3-5) Flat correction
 Correction begins with 5 Wave impulse pattern getting completed.
 Wave A is of 3 Waves, Wave B of 3 Waves and Wave C come sin 5 Waves.
 Wave B may test extreme of Wave 5.
 Wave C may test extreme of Wave A.
33 Technical Analysis

34. ABC (3-3-5) Irregular Correction
 Wave A is of 3 Waves.
 Wave B Exceeds the extreme of Wave 5. Wave B is of 3 waves
 Wave C exceeds the extreme of Wave A and is of 5 Waves.
34 Technical Analysis

35. ABC (3-3-5) Running Correction
 Most trickiest one find as it looks like continuation of trend rather than correction
into 5 wave sequence.
 It is very rare to find . A running correction implies strong continuation of trend
following end of the correction.
 Wave A is very shallow correction. Wave B exceeds extreme of Wave 5. Wave
C retraces the Wave B but does not exceed the extreme of wave A.
35 Technical Analysis

36. Triangles
 Triangles appear to reflect a balance of forces, causing a sideways
movement that is usually associated with decreasing volume and
volatility. Triangles contain five overlapping waves that subdivide 3-3-3-3-
3 and are labeled a-b-c-d-e.
36 Technical Analysis

37. Wave 3 Projection
 Wave 3 can be 100%, 162%, 262% of wave1
37 Technical Analysis

38. Corrective Wave 2
 Wave2 tends to be simple ABC (5-3-5) Zigzag correction. Where Wave C exceeds extreme of Wave A.
 Wave 2 Cannot Exceed the Wave 1.
 Wave 2 usually retraces 50% of Wave1.
 Waves 2 usually does not exceed 78.6% of wave1.
 Wave 2 retraces less than 50% then wave 1 then Wave 3 will usually be extended.
38 Technical Analysis

39. Trading Technique using Wave 2
 Ideal strategy is to enter near completion of Wave2 arounf 50% or 78.6%
wave 1 .
 Since 50% retracement we are minimum looking for Wave2 to retrace .
Don’t enter before 50% of wave1.
 If market fails to reach 50% of wave 1 or retraces more than 78.6% of
wave 1 then BUY breakout of Wave1.
39 Technical Analysis

40. Wave 4
 Wave 4 should not trade in range of Wave1.
 Principal of alteration : If wave 2 was simple ABC correction then Wave4 will be complex
correction.
 Wave4 usually retraces 23.6% or 50% of wave3 but not more than that, which gives us
Minimum and Maximum target.
 Wave4 is usually in price equality of wave2 or 62% or 162% of wave2
40 Technical Analysis

41. Trading technique to trade Wave4
 Buy at correction wave4.
 Most of the time Wave are complex correction we should
wait for some time to clearly identify the patterns for time
and price retracement.
41 Technical Analysis

42. View on the Market
42 Technical Analysis

43. Technical Analysis Chat Room South Asia
43 Technical Analysis

44. Your Valuable Feedback
 vishal.mehta@reuters.com
 Vishal.sultania@reuters.com
44 Technical Analysis

45. Thank you.
 After learning Elliot wave.

45 Technical Analysis