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.
please give ur comments on nifty.
Is it necessary that after an extended W3 , W5 should end at 38.2% projection ?
Generally W5 ends at 61.8% projection. Off-course, one should be cautious at 38.2%
Hello Rainmaker, You are right. When we get an extended 3rd, the first tendency for wave 5 is to travel to the 61.8% projection of 0-3. The next preferred level is equality to wave 1, and the last one is 38.2%. In very rare cases, we get a second extension. If I remember right, these have been covered in FWTFF book. Also, you are on the right track with the stock you mentioned.
These kind of interaction with the Guru makes learning easier.
sir,, i know it wont be the right forum to talk about rel communication a highly volatile with good beta stock ,,,,, since u tracked it and place a buy with a meaning full tgt ,,,, i am not saying it reached there or not ,,,,, wt went wrong and where we could have sensed that thing ,,,, right and wrong is part of any study ,,, since lot of people commneted on that and i am sure we all who have read u r book like to further understand what went wrong or where we could have taken a corrective action ,,,, it would be greatfull to you
HI Digvijay, Thanks for your comment. There is no such thing as being right or wrong. Anyone who thinks that way doesn’t understand the markets. We should use Elliott Waves to guide us at the time we are making the analysis. We do the analysis so that we have a basis for our trading decision at that time. The markets are dynamic, and we should constantly be alert to unfolding news and the price responses. We cannot take a position based on the analysis, and shut off everything else. As I often make clear in the blog, EVERY SINGLE ANALYST will find that is count is wrong sooner or later. In truth, it is not the count that has gone wrong, but the market has changed. So we change our counts to figure out what to don next. This is why you should learn the application of the EWP to trading. Ignore those who point out your so-called mistakes. These people don’t know what they are talking about.
very true sir…….
for more glorification of wave 5
hello sir ,
I am a regular follower of your blog and have read your book also but it seems i will have to read it a few more times to get every thing out of it. My this question is regarding Fibonacci t1me zones though it is on the same principles that of Fibonacci numbers can you please help me learn it.
Paras, In my book I have explained that trying to figure out time element using EWP is a frustrating endeavor
From ur above reply to rain maker it seems that the W5 will not end at 38.2% and it may travel upto 61.8% which makes W5 reaching a target of above 2000. is it correct sir, please guide me as already the stock has crossed 1812 today.
Raman, The post is meant to teach people how to use ELliott Waves to make trading and investing decisions. It is not trading advice.
Dear Ramki Sir,
Today in such a severe downfall, Dr Reddys has rose by 3% and closed near to 1900. What do you suggest now based on technicals, can I go long in this stock as a trader? Please advice.
HI Ravi, Sorry I don’t give trading advice in this blog, It is meant to teach you how to use EWP.
Dr Reddy (fut cmp 1859) is now in sell mode with SL 1885 closing basis and Tgt 1 = 1788 & Tgt 2 = 1660. These figures are based on Macd & trendlines.