Elliott wave theory applied on Copper and identifying trade setup.
Technical analysis is the objective way for forecasting the direction of prices through the study of past market data, primarily price and volume. Elliott wave theory is the advanced technical tool and it helps to understand probability about markets. By knowing the wave patterns, you’ll know what the markets are likely to do next and (sometimes most importantly) what they will not do next. By using the Elliott Wave Principle, you identify the highest probable moves with the least risk.
We are all familiar with high volatility in commodity market. Many market participants find difficulties in trading commodities. Elliott wave theory help to understand the nature of the trend and help us to anticipate the short, medium and long term view. Below we have shown daily chart of Copper which follows Elliott wave counts in a very accurate way and predicting the patterns in systematic way.
MCX Copper Daily continuous chart:
We can observe in daily chart of MCX Copper, since April to 2013 we have witnessed strong consolidation in triangle pattern in the form of wave B. Thereafter, prices have breached the pattern on downside and moved lower in an impulsive way in the form of wave C and moved lower till 360. Near 360 MCX Copper has formed bottom and rallied sharply till 515 levels. Up move from 360 to 515 has formed impulsive structure.
Basic rules of Elliott wave:
a. Wave 2 should not move beyond wave 1.
b. Wave 3 cannot be the shortest of wave 1 and wave 5
c. Wave 4 should not enter in the territory of wave 1.
Above we have given basic rules which have to be adhered strictly. Apart from this there are many other guidelines of Elliott wave theory which we use along with simple technical analysis i.e. channeling technique, momentum indicators, etc…
From trading perspective, once we know how the movement is going to be and the wave count, we have to use bar techniques, break of channel and a higher high higher low formation to confirm the reversal. Also faster retracement of last falling segment provides first positive confirmation and Fibonacci provides the projection levels. Even 61.8% retracement method can be used for trade setup.
To get internal wave counts on MCX Copper and detailed explanation subscribe to our daily research report “The Commodity Waves Short term update”. Along with MCX Copper this report also covers MCX Gold, Silver and Crude.
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