Elliott Wave Principle

The Elliott Wave Principle is a theory of rules that govern market price action. In the 1920s Ron Elliott, an accountant, discovered that market price action was not random but pattern in waves that formed predictable cycles. He postulated that these patterns were not the result of the law of supply and demand but the summation of fear and greed and that market price action was the leading barometer of social mood. Moreover, this mass mood, when quantified, takes a form that can be measured and timed as it waxes and wanes.

Elliott Wave also was the first to postulate that these patterns were self-similar at different degrees of trend. He did not know it at the time, but what he found was that market price action was a fractal. This humble genius, also found a nomenclature that organizes this fractal system from the largest fractal to the smallest tick chart. In essence, the Elliott Wave Principle states that people buy stocks when they are happy and they sell them when they feel bad.

Here at timstuyts.com we use market dynamics to adjust targets when projecting the EW form. We still use the EW Fibonacci expansion, extension and retracement tools; however, we adjust targets in reference to weekly and monthly high/low Fibonacci extensions. First we look at the previous month’s range and in case it in a Fibonacci extension tool with the Harmonic extremes registered at both ends. The weekly range is then measured and overlapped with the monthly ranges to find Fibonacci confluence. When these confluence zones are extended back in time, you will find that the zones have held as previous support and resistance. We then go on to adjust our intraday targets at these support and resistance zones.