Failed Wave 5 labelling

[Philby]

Hi All,

Can someone tell me if GET will label a failed Wave 5 ?

In a recent trade that I did, GET did not label the Wave 5 low and has now been zig zagging around in what looks like an extended wave 4 and it even looks like it is now heading into a wave 3 up. And still the previous low has not been labeled as a wave 5 low.

I the trade, the PTI was < 35 and the Wave 4 bands were exceeded giving a strong indication of a failed Wave 5 and a potential double bottom. But when and how does GET label the recent low as a Wave 5?

Cheers

[apharris]

GET won't label a failed Wave 5, but the wave count will eventually catch up with price. Best to use regression channels or trend lines to determine if there may be a failure.

[Philby]

Extended Wave 4

After quite a bit of research and reading up on wave 4 & 5, it seems that there is a fairly definite opinion amongst professional Elliott Wave traders that wave 5 failures are very very scarce indeed and that most of the time what you are looking at is in fact an extended wave 4.

The trade issue I originally raised below has in fact turned out to be a very painfully protracted wave 4 extension.

However the original question is still valid - if you look at the attached chart you can see that the price action has already had three attempts to get back near the previous Wave 3 low and is now in a fourth try to go lower and complete the Wave 5. I suspect that we will not get a new wave 5 low that is materially lower than the previous wave 3 but rather a double bottom that is marginally below the wave 3 so that GET can label the wave 5 and close out this 5 wave sequence in order to allow the formation of a next five wave series in the opposite direction.

Is this how other traders might see this trade panning out. If so does anybody have any tips or guidance on how to judge when the wave 5 low may finally come in?

Cheers

[MR]

What time frame is this chart, a daily?
What is the symbol you are looking at?
Have you tried cross-referencing this time frame and its wave count to the higher time frames and their wave counts?

[Philby]

Failed Wave 5

Hi All,

The time frame is a daily chart of NAB.AX

I have been trading it as a collar but using the Elliott count to determine when to do the short calls and long puts around my stock when the market looks as if is declining compared to only doing some long calls when the Elliott count tells me that there is a higher probability that the price has turned and is moving back up.

As you can see from the attached chart, NAB is moving between a reasonably defined channel and that compared to the previous charts in earlier posts, the label for Wave 4 has been shifting across to the right and was previously where "A" and then "B" and then "C" labels are now.

It seems to me that that in order for this protracted pattern to be completed, that NAB has to drop down to around $21.50, which is below the previous Wave 3 low, to complete the wave 5 pattern.

So back to my original request for help or guidance on this one :

Q1 - Do others agree that if the wave 5 cycle is to complete, then price has to drop down to around $21.50 to have GET lavel a Wave 5?

Q2 - Given the channelling we see in NAB, is there a way to get an idea of when this channelling may cease and price break out to the downside to complete the wave 5 pattern?

Cheers

[Robinb]

Hi Philby
Sorry, what I do not understand is why you have any expectation of a 'good' Wave 5. To my mind, the low PTI and the state of the Oscillators indicate failure.

[Philby]

Hi Robin,

I should clarify my expectations on this pattern. I do understand that the PTI and wave 4 bands have failed and that I am not expecting a new wave 5 low, but rather at least a Double Bottom around the previous wave 3 low which is the target of around $21.50 I mentioned below.

Others have also pointed out that this is a failed wave pattern so why be in it at all - the answer is simple - I have physical stock that I am protecting and as you know when you have stock you run a Collar 24/7. I am simply adapting the Collar trade to my own designs based on around 12 months of backtesting and other live trades because the way the ASX seems to move and the option spreads are quite different to the trades I do on the US markets.

The question I keep going over in my mind is how does the Elliott algorithm break out of the extended wave 4 pattern ?

Mathematically there can only be two options. Either price goes down to around $21.50 and is just low enough to create a wave 5 low and then the pattern begins again or price rises high enough to give a whole new wave count. In the case of NAB I discounted this possibility as being too low a probability because price would have to rise monumentally higher to get a new count and as Marc suggested below, by cross referencing the weekly count the overall trend is a downward move which lends credence to a higher probability to price retracing to the low side.

Of course these are usually "famous last words" as price sky rockets up to give a new wave count. But we can only trade what we see and look at where the probabilities are most likely to take us.

So in summary I feel that :

1. Advanced Gets algorithms will want to satisfy a wave 5 count at some stage or give a new count all together - but there has to be an end to the extended wave 4 that NAB is in at present.

2. The weekly trend is down.

3. the smallest move to give a new wave count is down, to yield a double bottom and potentially a wave 5, compared to the large move that would be required to the upside in order to get a new wave count.

Hope this clarifies how I am seeing this trade - what I am in a pickle about is will GET look to get a wave 5 count or not and how can one estimate the timing of the end of the extended wave 4.

Cheers

[MR]

I would like to help but I do not have your data. Could you do me a favor and capture an image of a compressed data of NAB.AX monthly, weekly and daily charts so I can see a picture of what the overall patter looked like. Load up the same AGET tools on those higher level charts so I can compare and contrast the higher time frames with the current daily you are showing. I would also need to see more than the bottoming action to be able to explain things better. I might be able to help if I had that other information visible.

[Philby]

Marc,

Here are the charts for Monthly, Weekly & Daily over the longer time frame.

Cheers

[Philby]

Here is the weekly

[Philby]

Here is the Daily for the longer time frame.

[MR]

Philby,

What you are seeing as a failed W5 I am seeing more as a mislabeling of that wave structure. I think the AGET algorithm will eventually push the W5 back to the last low once it gets more data to confirm what I am seeing.

To me it looks like your data might have just gone through some sort of an internal a-b-c pattern and the subsequent oscillation was a basing pattern that now makes more of a rally a better possibility in the near-term. Those are extremely hard to labels correctly until the data better clarifies itself.

I think your June, July, Aug lows are very capable of holding for now and this current rally is capable of extending higher even if it were to now pullback for a few weeks.

I wish I could tell you more but I really cannot tell too much more unless I had access to this data where I could take more time looking at the totality of AGET tools, techniques, methodologies to better define the wave structure possibilities on the various higher time frames and also better understand the support/resistance picture as well.

It seems like all three time frames suggest the stronger resistance is higher and the immediate support can hold for now.

Hope this helps. I did the best I could my friend with what limited tools I now have available to help you with.

Best wishes on your trade,

your old long-lost friend, marc

[Philby]

Failed Wave 5

Hi Marc,

Great to hear from you after so long a time.

Well, the saga of National Australia Banks (NAB.AX), failed wave 5 continues. Although I agree with your conclusions below, in that it is not a failed wave 5 but more likely an extended Wave 4 and that right now the trade is locked in a series of ABC corrections.

I have attached another chart as at 15th October and as you can see the last Wave 3 low was made back in June and for the last five months the stock has been vacillating between $22.50 & $26.50.

In order to get a better understanding of the dynamics driving this stock I have started using the 5,17 Oscillator. This decision was based on some of the notes I got from Tom Joseph years ago when he wrote the mechanical trading system paper and talked about the benefits of the 5,17 showing the internal wave count.

In the attached chart I have made some preliminary wave labels in brown for the [1], [2] & [3] Oscillator points. The key move I am waiting for here is the potential for the inner wave count to begin the Wave 3 - it looks as if NAB is about to go into the Wave 3 but in this market you just never know - a retracement may be just around the corner and we will be back into the ABC pattern again.

Because we are in an extended Wave 4, I believe I need to ignore the MOB target of $21.86 as the potential lower side target and be a lot more conservative and go with a potential Double Bottom target area of around $22.70. If NAB gets past this double bottom point, even marginally, the GET algorithm will nail the Wave 5 low finally and we can all get on with our lives.

The danger point in the downward Wave 5 retracement will come around the 1.62 Fibonacci level ($23.44, I think as this looks to be a reasonable support level and may give the market participants pause to consider moving back up. A reasonable possibility given we are in October and all the nasty things that happen to economies such as recessions, crashes etc. all seem to happen in October. But hopefully this will only be a momentary rest stop on the way down to the double bottom of $22.70.

I would be interested in how you are seeing this analysis shaping up - it is quite an interesting trade so far and a good learning lesson about inner wave movement.

Cheers

[Philby]

Failed Wave 5

Hi Marc,

Thought you might find this interesting - In May last year we spoke about the failed wave 5 for National Australia Bank (NAB.AX).

Here we are in 2011 and the Wave 4/5 formation is still going sideways - I have never seen such a protracted failure for the wave 5. 9 months in still this baby has not hatched !!!

I have given up trying to work out when this thing is going to turn and finally go down to complete the wave 5 or to retrace back up and hit a new high to give a wave 3 recount.

Cheers

[Philby]

Failed Wave 5

Here is the chart - for some reason it got dropped off the message below.