Stock picking and the Elliott Wave pattern - Methodology

Source : Reprinted from Elliott Wave Principle, with permission from Elliott Wave International, Frost and Prechter, Chapter 2, pg.77

The same pattern shows itself on the charts of many stocks. Surprising how an analogy can be drawn in the accompanying psychology even at a stock specific level. The chart below shows how the Value Wave forms. The 5 wave pattern of a stocks discovery and growth v/s the accompanying fundamental change sentiment and psychology.

Over the last 5 years I have found many stocks to fit this pattern and the results in most cases have been surprisingly fantastic. I say surprisingly because of how the psychology of the pattern at the low of wave 2 is more often than not one of pessimism amongst most analysts. How most of them [except a few visionaries] reject stocks as a buy just before they explode in wave 3. Also the intermediate wave patterns continue to form irrespective of the stage at which the index is placed.

The key reason why stocks are missed out in most cases is fear of not getting immediate performance. Therefore its not the analyst but how the financial services industry pressurises them for immediate performance that more often than not kills vision.

You can visit Vale Wave Stocks identified based on this pattern at various stages in the wave and in many at the beginning of wave 3. The results will hopefully speak for themselves.

I believe this should benefit many investors and traders alike.

The Value Wave Stocks

The Value Wave Stocks is an identification of stocks on the above model that are likely to progress upwards along the path of the 5 wave impulse pattern over a 2-5 year time horizon. With the market itself today in an advanced bull phase various stocks are at different degrees of the wave structure shown above. What therefore is critical is finding new ideas that are at an early stage within the pattern and attempting to participate in the move. The difficult part is that most investors [or should I say traders] do not have the patience or time horizon required to get the best out of unfolding pattern. Since time is a less exact study of the subject of technical analysis there are times when the upward moves have unfolded very fast and others where it has taken peoples patience before rewarding them. All the same if the identification is right the move unfolds sooner than later.