Can one trade an individual stock using Elliott Waves? The answer is a definite yes, provided it is a well traded stock. Take Caterpillar, for instance. This stock has provided some nice trading opportunties in the past. Looking at the sharp recovery from the recent lows below $68, you could have picked up over 7% by being patient till it reached the 61.8% pull back. The mini fourth wave down from around 98 was an easy pick! But where does it go from here? Take a look at the second chart. It looks like we are in a B wave of a potential ABC correction that could go down to around 83. The B wave itself should be made up of 3 waves, and perhaps we are in the 3rd step of the B wave.
If you have read my book “Five Waves to Financial Freedom” carefully, especially the part dealing with fifth wave extensions, you would immediately see the logic of these charts posted here.
What could go wrong in this analysis? Perhaps the wave that I have marked as the fifth wave is only a 3rd wave? That is certainly a possibility, but a remote one. In order to safeguard ourselves from this possibility becoming true, we should wait for the downmove to start aggressively, and then join in. Those with deeper pockets can consider a tetative short near the prior high, but be mindful of an irregular B wave that could go above that top before it suddenly develops a fright and rushes back down.
The entire wave structure from Oct 4th to the Oct 28th close looks like an A-B-C retracement to me. The Oct 12th close looks like the end of wave A with a running flat wave B ending on Oct 18th, and wave C ending on Oct 28th. It would have been a .63 correction of the previous decline from 115.42 to 67.17 which was a clear 5 waves. From there, it looks to me that wave 1 down ended on Nov 1st, and wave 2 up either ended on Nov 11th or will end soon.
Re. the CAT chart: though not exactly a flat, it might be one with the C wave low about 91 on Nov. 9. If that wave count is correct, then CAT looks to be starting a new wave count to the upside with Wave 1 underway. If that wave count is correct then it will hold the Wave 1 low of 91 (using 4 hour chart).
Hi Mr Ramki can you please give us an update on caterpillar. thanks pooja.
Pooja, While we stay above 87.60, we edge higher in CAT