Elliott Wave: Which Method Can Traders Use to Confirm an Elliott Wave Count?

This entry was posted by Thursday, 8 March, 2012
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Jeffrey Kennedy has developed a theory that guides his analysis 
By Elliott Wave International

When you are watching a pattern develop on a chart, how can you be sure that your wave count is correct? The Elliott Wave Principle offers rules and guidelines that you can use to add confidence to your wave count.

Elliott Wave International’s Senior Analyst Jeffrey Kennedy spent years designing his own technique to improve his accuracy. He came up with the Jeffrey Kennedy Channeling Technique, which he uses to confirm his wave counts. The following excerpt from Jeffrey’s Trader’s Classroom lessons, a regular feature of his Futures Junctures Service, offers an overview of his method.


My theory is simple: Five waves break down into three channels, and three waves need only one. The price movement in and out of these channels confirms each Elliott wave.

Base Channel
Figure 61 shows three separate five-wave patterns with three different channels drawn: the base channel, the acceleration channel and the deceleration channel.

The base channel contains the origin of wave one, the end of wave two and the extreme of wave one (Figure 61A). Of the three channels, the base channel is most important, because it defines the trend. As long as prices stay within the base channel, we can safely consider the price action corrective. Over the years, I’ve discovered that most corrective wave patterns stay within one price channel (Figure 62). Only after prices have moved through the upper or lower boundary lines of this channel is an impulsive wave count suitable, which brings us to the acceleration channel.


Acceleration Channel
The acceleration channel encompasses wave three. Use the extreme of wave one, the most recent high and the bottom of wave two to draw this channel (Figure 61B). As wave three develops, you’ll need to redraw the acceleration channel to accommodate new highs.

Once prices break through the lower boundary line of the acceleration channel, we have confirmation that wave three is over and that wave four is unfolding. I have noticed that wave four will often end near the upper boundary line of the base channel or moderately within the parallel lines. If prices break through the lower boundary line of the base channel decisively, it means the trend is down, and you need to draw new channels.

Deceleration Channel
The deceleration channel contains wave four (Figure 61C). To draw the deceleration channel, simply connect the extremes of wave three and wave B with a trend line. Take a parallel of this line, and place it on the extreme of wave A. As I mentioned before, price action that stays within one price channel is often corrective. When prices break through the upper boundary line of this channel, you can expect a fifth-wave rally next.

In a nutshell, prices need to break out of the base channel to confirm the trend. Movement out of the acceleration channel confirms that wave four is in force, and penetration of the deceleration channel lines signals that wave five is under way.


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This article was syndicated by Elliott Wave International and was originally published under the headlineWhich Method Can Traders Use to Confirm an Elliott Wave Count?. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.



S&P500 Elliott Wave Analysis

This entry was posted by Friday, 2 September, 2011
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S&P500 Elliott Wave Analysis Updated from 22 Aug 2011

 

S&P500 Elliott Wave AnalysisS&P500 Elliott Wave Analysis

Please visit our Trading Forums pages for more indepth market commentary and more S&P500 technical analysis charts.

Direct link to the post Kennys Technical Analysis Charts: S&P500

SP500 Elliott Wave Analysis

This entry was posted by Wednesday, 10 August, 2011
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SP500 Elliott Wave analysis and technical analysis updates for 10 Aug 2011

View the previous SP500 Elliott Waves analysis charts from 12 July 2011

It has been quite a while since I published my last Elliott Wave charts. There was really no reason to update them as the count continued to play out as expected.

Short term updates and discussions are now conducted in our sites new  Trading Forums.

Regular visitors to Kennys Elliott Waves Blog may remember that my long term target for this larger move down was 160-200 points from the 1370 high…this target was put in place the week before the market topped on our 1370 level, and then confirmed in the weekly newsletter that came out the day before 1370 sealed the turn.

This move down has been even weaker than I expected and the S&P 500 actually lost 270 points into the this weeks low, so what does that do to the Elliott Wave analysis……

Read the rest of this blog post »

SP500 Head and Shoulders Pattern

This entry was posted by Monday, 8 August, 2011
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1140 prints and completes the target set by the S&P500 head and shoulders pattern.

 

SP500 head and shoulders pattern.

SP500 Head and Shoulders Pattern

SP500 Head and Shoulders Chart

This entry was posted by Thursday, 4 August, 2011
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Head and Shoulders Pattern

Updated SP500 Head and Shoulders Chart

Please view the chart in conjunction with the commentary in the

Traders Day Trading Forums

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This entry was posted by Thursday, 4 August, 2011
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