1.What stage is this stock in?
This stock is in stage two.
You remember the stages right? Stage one is a consolidation, stage
two is an uptrend, stage three is another consolidation, and stage four
is a downtrend. This stock was in a stage one in February but in
March, it broke out into a stage two. It is currently still in a stage two.
2. Is this stock in and uptrend or a downtrend?
This stock is in an uptrend.
3. How strong is the trend?
This stock is in a strong trend.
The ADX indicator is near 40 which we consider to be a
fairly strong trend. The higher the ADX, the stronger the trend. This
stock is at the lower trend line.
4.What wave is this stock in?
This stock is in the fourth wave.
In Elliott Wave theory, a stock goes through 5 waves in an uptrend. In
the chart above, the first wave after the breakout is wave 1. The first
pullback is wave two, the next wave up to 3500 is wave three, and
the pullback that we are in now is wave four. There is one more wave
5.What do the moving averages tell me?
The moving averages are lined up.
We want the 10 SMA above the 30 EMA and we also want there to be
plenty of space in between the two moving averages. This creates the
Traders Action Zone (TAZ) that we can trade in.
6. Was there a breakout recently?
There was a breakout recently.
This is good! We want to buy a pullback as close as possible to a
breakout as we can. Why? We want to know that there is interest in a
stock. Remember that institutional traders have to accumulate shares
over time. They can’t buy tons of shares all at once. They have to
buy a little at a time. By looking for breakouts, we can expect them to
have to buy more in the future. This will propel the stock higher.
7. What does volume tell me?
Volume is showing that there is interest in the stock.
See the big volume on up days and the lower volume on down days?
This is the ideal scenario but it isn’t absolutely necessary.