Type II Sell

Elliott Wave 5 (Up)

Moving Average (6/4 Below)

This identifies issues that are Type II Sell setups, which means that the 5 sequences in a up direction is over, and the trend will continue in the opposite direction. For a comprehensive explanation of Elliott Wave theory, click here.

 For Advanced GET Users:

Once the Advanced GET software confirms a Wave 5 is in progress, start monitoring more closely for the following conditions:

1. Look for prices to be near the Fifth Wave projection.

2. Make sure the 5/35 Elliott Oscillator confirms a fifth wave by providing clear divergence, with the 5/35 Elliott Oscillator pulling back to zero (base-line) in between.

3. At the end of a 5 wave downward moving sequence, use a 6/4 DMA (Displaced Moving Average) Channel or a RTC (Regression Trend Channel) to buy on a crossover of the upper channel or 6/4 DMA Channel line.

4.  The 6/4 DMA Moving Average Channel is a simple combination of two moving averages displaced or shifted to the right. Both moving averages will have a “Length” set to “6” and the “Offset” set to “4.”  Set one moving average “Source” to “High” and change the color to “Blue;” the other set the “Source” to “Low” and make “Red” the color.

5.  A Regression Trend Channel (RTC) is simply the standard deviation of the linear regression price data. It is calculated using the actual prices of the bars in the trend. The idea is to draw an upper and lower channel from the linear regression line by using the standard deviation of the prices. The break of a Regression Trend Channel is usually used as an entry or exit signal.

As long as the momentum in the market continues, the DMA stays out of the way. When the price bottom or tops out in Wave Five, it eventually breaks (crosses) the DMA or RTC. This provides a confirmation to enter a position. This also provides a defined stop above the highs.

The logic is the same for an advancing upward sequence as it would for a declining five wave sequence.