High-Confidence Stock Trading Opportunities

How to Spot High-Confidence Trading Opportunities in a "Pinch"!
Why this single moving average chart pattern belongs in your technical toolbox today

By Elliott Wave International

When it comes to the world of technical market analysis, the biggest obstacle isn't a lack of quality, but rather, an abundance of choice. There are literally hundreds of technical tools out there, with digital libraries and chat boards devoted to the many variations of individual components.

If you used them all, your technical pages would look like the motherboard of the Starship Enterprise. And you'd need Spock himself to interpret the massive influx of data.

So, where on planet Earth do you start? How do you curate the right technical tools to support your trading style and maximize your ability to spot high-confidence setups in real-world markets?

Well, that's where our Trader's Classroom editor Jeffrey Kennedy comes in. In his August 9 video lesson titled "Pinch Me! How to Build Your Ideal, Custom Technical Indicator Page," Jeffrey shares one of his top three favorite technical chart patterns: the moving average "pinch.”

Right away, Jeffrey stresses the two main functions of any technical indicator page:

1. Identify the trend
2. Identify areas of oversold and overbought conditions

The moving average (MA) "pinch" accomplishes both, and here's how: First, the pinch occurs when all three MA lines -- green, red and grey -- come together and appear to form one single line. Then ... well, you'll just have to watch this free video to find out.

Jeffrey shows you several real-world examples of MA pinches, including this one in late 2018 price action of Big Board listee Chipotle Mexican Grill (ticker symbol CMG).

In the free video, Jeffrey highlights the area of compression where the pinch occurred and describes it as a "beautiful little bullish set-up," confirmed by the powerful advance that followed.

In fact, during the time of the pinch's formation in Chipotle, Jeffrey featured the market in his January 10, 2019 Trader's Classroom. There, Jeffrey homed in on the narrow and choppy price action in CMG, a six-month long sideways move that barely retraced 50% of the preceding rally, magnified here:

The same period of compression identified as a MA "pinch" was confirmed by all the characteristics of counter-trend price action -- the latter of which led Jeffrey to include Chipotle in his "I Like It!" market list for a strong move higher.

The next chart captures the volatile upside explosion that has seen a doubling in value of CMG prices to new record highs:

The first step to identifying a moving average "pinch" is to understand the mechanisms of the moving average indicator. In his August 9 Trader's Classroom video "Pinch Me!" Jeffrey lays the groundwork with a user-friendly lesson covering all the need-to-know basics.

Jeffrey also shows you how an MA pinch preceded three major buying opportunities in 2013, 2016 and 2019 in the tech-giant Apple.

Plus, you'll see how an MA pinch underway right now in the Healthcare Select Sector SPDR fund (XLV) suggests an "exciting" period of volatility may be ahead.

Free, watch Jeffrey Kennedy's Trader's Classroom “Pinch me!” video lesson now -- and see why the MA pinch is the first step to building a custom technical indicator page.

No, this isn't a dream; the power of the pinch is very real!

a Lesson in Spotting Trade Setups

A Four-Chart Lesson in Spotting Trade Setups

July 10, 2012

By Elliott Wave International

You can find low-risk, high-confidence trading opportunities by trading with the trend. The trick is to find the end of market corrections, so you can position yourself for the next move in the direction of the trend.
This excerpt from Jeffrey Kennedy's free 47-page eBook How to Spot Trading Opportunities explains where to find bullish and bearish trade setups in your charts and how to zero-in on these opportunities. If this lesson interests you, the full 47-page eBook is free through July 16.

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On the left-hand side of the illustration below, there are two bullish trade setups. As traders, we want to wait for the wave (2) correction to be complete so we can catch the move up in wave (3) -- this is the trade. What we are trying to do in this bullish trade setup is anticipate the potential for profits on the buy-side as prices move up in wave (3). Another bullish trade setup is at the end of wave (4).

As traders, we are looking to buy the pullback and position ourselves within the direction of the larger up-trend. Remember, three-wave moves are corrections, which means that they are countertrend structures. On the other hand, five-wave moves define the larger trend. As traders, we want to determine what the trend is and trade in the direction of the trend. Our buying opportunity to rejoin the trend is whenever the trend pauses and forms a correction.
Now, let's look at the right-hand side of the illustration where we see two bearish setups. When a five-wave move is complete, it is retraced in three waves as a correction. The end of the five-wave move presents the first trading opportunity that we can take advantage of the short side (or the sell side) as the wave (A) down begins.
Notice the second bearish trade setup gives us another shorting opportunity as wave (B) tops.
So, within the classic wave pattern of five waves up and three waves down, we have four high-probability trading opportunities in which we are either positioning ourselves in the direction of the trend or identifying termination points of a trend. I want to share with you some tricks I have picked up over the years about how to analyze corrective waves and their termination points. The single most important thing I've learned from analyzing corrections is that corrective or countertrend price action is usually contained by parallel lines.

As shown above, draw the parallel lines by beginning at the origin of wave A and going to the extreme of wave B. You draw a parallel of that line off the extreme of wave A. So basically you have a small, slightly angled downward price channel. This will show you the containment region for wave C. It also shows you an area toward the bottom of the lower trend line where you can expect a reversal in price.

Here is another example. Again, you draw the parallel lines off the origin of wave A, the extreme of wave A and the extreme of wave B.
Toward the upper end of the upper trend line, you will usually see a reversal in price.

This example shows how countertrend price action is contained by parallel lines in the British pound, 60-minute, all sessions. Why is it important to know parallel lines contain the corrective or countertrend price action? Number one, it will increase your confidence that you are indeed labeling a countertrend move properly. Number two, it identifies areas where you will likely see prices reverse. For example, we see this reversal up near the top.

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What to Learn More? Get the FREE 47-Page eBook This brief trading lesson is just a small example of the opportunities you can find once you learn to identify key market patterns. Learn more in your free 47-page eBook, How to Spot Trading Opportunities. This valuable eBook is regularly $79, but you can get it free through July 16. Download your free copy of How to Spot Trading Opportunities today >>

These are the Best Technical Indicators for Trading

What Are the BEST Technical Indicators for Successful Trading?
8 technical analysis tools that give any trader an edge
November 14, 2011

By Elliott Wave International

You may have seen a TV ad where "traders" describe their strategies, and one says, "I trade on fundamentals." That sounds very reassuring -- except that, on any given day, "fundamentals" are a mixed bag:

• You might have a good U.S. employment report...but bad news from Europe
• A positive Fed statement...but a negative housing number
• Strong earnings...but slowing consumer spending

And so on. Which "fundamental" factor trumps the other? Which one carries more weight in your forecast? Your guess is as good (or bad) as anybody's.
Your alternative is technical analysis, which forecasts the markets' short- and long-term moves based on objective metrics, not guesses.
Here at EWI, we've always strived to help our readers learn to think for themselves. So we've put together for you a free 8-lesson report, "Best Technical Indicators for Successful Trading" that teaches you how to use these technical tools:

1. The Personality of Elliott Waves
2. Head and Shoulders Pattern
3. Fibonacci Retracements
4. Advance-Decline Line
5. Sentiment
6. Volume
7. Trendlines
8. Momentum Analysis Using MACD

Here's a small preview of this free 8-lesson report.

Trendlines

A trendline represents the psychology of the market; specifically, the psychology between the bulls and the bears. If the trendline slopes upward, the bulls are in control. If the trendline slopes downward, the bears are in control.



Moreover, the actual angle or slope of a trendline can determine whether or not the market is extremely optimistic, as it was in the upwards sloping line in Figure 1-1 or extremely pessimistic, as it was in the downwards sloping line in the same figure.

Now we're on to the fun part -- drawing trendlines. You can do this several different ways...

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Finish Reading This 8-Lesson Report Today, FREE In this free report, you will learn some of the most effective tools of the trade from analysts at Elliott Wave International, the world's largest technical analysis firm. Find out which technical indicators are best for analyzing chart patterns, which are best for anticipating price action, even which are best for spotting high-confidence trade setups -- plus how they all complement Elliott wave analysis. Download your "Best Technical Indicators" report now >>