Elliott Wave Analysis is a powerful tool if used properly. For instance, the following Elliott Wave Analysis of Dr. Reddy’s laboratories Ltd as shown in the chart suggests that a major extended third wave has likely finished at the Rs 1968 levels. If you had this stock in your portfolio, and noticed that the 5th wave has a target at 1976, would you have waited for the last 25 or 30 rupees before getting out? Of course not!
I am positive that there are countless traders who went long this stock above 1900, and are now hoping it will come back to break even. Whether you are a trader or an investor, you are better off learning some technical analysis.
Now what does the chart of Dr Reddy’s Lab tell us? Elliott Wave analysis tells us that a three-wave correction is due, because an extended third wave has been completed. We should look for a minimum correction of 23.6% of the 3rd wave, and that should bring the stock down to around Rs. 1600. That is the minimum target. It could go down a lot more! Suppose you own some of this stock, what should you do? You should consider selling on a recovery to around 1790 and not worry about it till it eventually comes down to around 1610.