#39;Combine Elliott waves with Fibonacci and channels for high conviction setup#39;
Elliott wave is a powerful forecasting method but it is equally important to combine this advanced technical tool with other methods to capture reversal areas with high conviction.
For doing it correctly, Elliott wave counts are important and should be applied to channels and Fibonacci methods rigorously. Glenn Neely of Neo wave analysis has a rule of the channel and the way it has to be drawn.
Without channeling techniques, Elliott wave cannot be done. We also believe that channels along with Fibonacci projection play a vital role in the pattern identification and correct counting can be done by using it.
Below chart shows the Elliott wave on 15 minutes chart:
Nifty 15 minutes chart:
In the above 15-minutes chart, the fall is in an impulsive fashion. The best way to draw a channel is to connect the highs of Wave 2 and Wave 4 (as it is a downward impulse, in case of upward impulse lows of wave 2 and wave 4 has to be connected together) and draw a parallel to this from the end point of Wave 1.
This results in an ideal channel. As long as the channel remains protected the impulse pattern will continue.
The Fibonacci retracement and extension also play a vital role to understand where are the turning areas of a Wave.
In the above chart, Wave 3 is exactly 200 percent of Wave 1. As Wave 3 is extended there will be a tendency for Wave 5 to travel towards equality with Wave 1.
In a nutshell, channels and Fibonacci when combined with Elliott wave provide very high conviction trade setups and many Elliotticians ignore this concept.
The author is Founder & CEO, Waves Strategy Advisors.
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