There have been persistent requests from my readers in India for articles on how to use Elliott Waves to invest in Indian stocks, and this post looks at Hindalco. Let us start from the February 2016 low of 58.80. A lot of traders would have been reluctant to buy Hindalco when it was falling like nobody’s business. But in the short span of six months, Hindalco has already reached the 150 level, returning 150%. Such spectacular returns go only to the astute investor, who lies patiently in wait for the right opportunity and goes in aggressively.
The careful investor
You don’t always have to be picking the bottoms to make money. You could have invested in Hindalco at the right time using Elliott Waves at many junctures on the way up. In my book ‘Five waves to Financial Freedom” , I have discussed the concept of reflex point. Once Hindalco went past the reflex point in a five wave move, the careful Elliott Wave investor would have watched the stock on a daily basis to see when he could join in the upcoming third wave. The first chart below shows the reflex point as well as the five wave rally that took it past that point.
You can see from the above chart that wave 2 was brief, falling only slightly below the 38.2% retracement level. When the explosive rush to the upside happened with a gap and an expansion in volume, you would have immediately committed some funds. That is because you now know that wave 3 is very likely underway.
Buying in the midst of a third wave
I teach many strategies for real-time trading in my seminars and workshops. Today, you get a snippet. Read this post as well as the one below (Walldan Group Inc analysis) and you will see what I am hinting at. The following two charts suggest that Hindalco could have potentially reached the end of an extended third wave. Mark my choice of words! I try to remind myself everyday that no matter how smart I think I am, the market is determined to show me my place! Also bear in mind that we can never be sure where an extension will finish!
Here are the internal waves of Hindalco’s third wave to support my hypothesis.
Finding out Hindalco’s minor fifth wave target
As you know from FWTFF book, you can anticipate where the fifth wave will finish by measuring the distance from point 0 to point 3, and then computing some Fibonacci ratios of that. Here you can see that Hindalco’s minor fifth wave finished exactly at the 38.2% measure of 0-3. Not bad at all!
Using the guideline of alternation to your advantage
One of the advantages of learning Elliott Waves is you can anticipate the level of difficulty in an upcoming move by looking at what happened earlier. Since Wave 2 was a simple correction, we should expect wave 4 to be complex. This is as per the guideline of alternation. You will see this explained well in FWTFF book. The key point with respect to Hindalco is we should be patient now for a proper dip to at least the 38.2% levels. While we are waiting, there could be a brief period of a price over throw to around 155.50. Let that pass! If you are like me, you will rather miss a move than trying to chase a rally that is potentially near its end. This is different from jumping on to a running train as it is leaving the station.That analogy is for joining a wave 3 in its early stages.
How high can Hindalco’s fifth wave go?
Well, once you have purchased Hindalco on a wave 4 dip, you can do some calculations yourself. This calculation is no different from what you did earlier for the minor wave 5 of the third wave! But because wave 3 was extended, there is also a chance that wave 5 could become equal to wave 1. These are all explained in FWTFF book in detail. So maybe you should give it another read! Enjoy.
Would you like the opportunity to learn from one of the best teachers of Elliott Waves? Then check out my online program at https://elliottwaves.com. That course will take your trading to a completely different level. Don’t take my word for it! Check out the testimonials!
the wave is done …btw waves are confusing coz they dont see relative value.. hindalco 44 expected soon atleast 90 odd …
Very useful for understanding Elliott Wave Principle, reflex point understanding is very vital part of trading plan. Thank you for explaining in detail in FWFF. Thank you so much. Your second book also gives nice idea to accumulate dividend stocks at attractive prices. I am happy to read both of your books. Do tell me if you have options trading strategies in ebook or any other format I am very much interested to buy. Thank you.
Hi Shripad, Thank you. I am glad you like the books. Other traders would love to read your reviews, if you can take a few moments to write a few words.As for option trading strategies, that is one more item on my to-do list, (which is growing all the time!!) First on the list is to take time to go to the gym regularly 🙂
in the last chart misprint of 2 for 3.
also mentioned “extended 3rd wave” but 45*1.618 =72 +84=157
made an high of 157.15 today.
does it mean that w3 has ended and wave 5 will extend ?
please throw some light.
HI Himanshu, I use Fib Ratios to estimate likely targets, and generally use the waves and wave structures to guide my trades. I am free to make changes to my wave counts as the market develops. Some people erroneously think that once I make a blog post then I am either wrong or right. The market is always right. As for me, I have a theory and can trade that theory. I know when I am right, and when I am wrong. I know when I am right, there is lots of money to be made (see the Wildan Group analysis. That is up by over 34%). When I am wrong, I can exit easily at a very small loss. That is my edge, that is WaveTimes way of approaching the market. Will wave 5 extend? The answer is simple. If waves 1 and 3 were normal, then there is a higher probability of wave 5 extending, and so your position size and risk appetite will be customized accordingly.
When calculating targets for 5th Wave,does 70.7 and 78.6 fib ratio has any role to play or in your experience 5th Waves tend to obey 38.2,50 and 61.8 ratios only.
Secondly,in case of Hindalco i personally feel its extended wave and might touch 190 levels because strong resistance emerge at that levels only on weekly timeframe.At same time we should not ignore possibility where existing Wave becomes ‘X’ wave because previous wave which started from low of 83 in Aug,13 went up only in three wave and while many of us might have thought that this is start of new Impulsive wave it tend to come ‘X’ wave.
HI Prabh, Thank you for writing. So long as you are following the rules and guidelines, stick with your own view. You could be right! Just be sure to realize when you are wrong and take corrective steps asap. all the best.
Sir, Why did Hindalco not go down as expected but moved up by 12% till now?
If a trade does not go as expected, then best approach is to remain silent and when a trade works as expected then make a HUGE claim about it – Elliott waves or not, but this is the eternal law governing the Share Market. Just my two cents.
Hi Ruhul, Thank you for sharing your two cents. I deeply appreciate your sentiments. Please read the full post carefully again. You will see that I was bullish for a wave 5, and was recommending that the right way to trade will be from the long side. However, ‘if you were like me’ then you will prefer to wait for a wave 4 dip and then buy. Naturally, everyone has his own style, whether aided by EWP or not. I have no desire to make huge claims. My work speaks for itself, and I don’t press anyone to buy my service! Good luck to you in your pursuits and please keep writing.
That’s very useful. I am also planning to purchase your book FWTFF. But; Any latest updates on Crude; Ramki Sir? I could see updates in 2012 at latest.
Hi Harshal, Thank you for writing. I am offering comments on several commodities on the premium service. This blog serves only to teach people how to use Elliott Waves. Best wishes.
dear ramki, your book has been immensely useful to me..For the price of 450, the inights that we gain are priceless..thanks for being so generous with your knowledge. just wanted to pick your brain on hindalco’s monthly chart. Can wave 3 on the monthly head beyond 400 in the months ahead
Shravan, Thank you. If you liked the book so much, please consider writing a review on Amazon as have so many others. Regarding your question on Hindalco, I am sorry that I don’t offer such comments on this free blog. Best wishes