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Vasilis Efthymiou
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Vasilis Efthymiou, Co - Founder of Amadalia, graduated from the Department of Mechanical Engineering, Technological Educational Institute of Larisa. From 2008 he is a full time trader of stocks and ETFs, applying Technical Analysis and the basic principles of Money Management for the creation... More
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  • Elliott Wave Count, Athens General Index ASE:ATH 0 comments
    Nov 13, 2012 7:51 AM

    Is it going to go up or down? A useful tool for answering this question is the Elliott Wave Theory approach. Elliott wave is an effective way of reading the chart and getting a clearer picture about the future market move. The appropriate application of Elliott Wave analysis enables us to predict in advance the possible direction of markets. Before we see the interesting pattern of the Athens General Index ASE:ATH, let's take a look at the basic concept of an Elliott Wave. In an uptrend, the bull market phase (the impulse wave) has five waves, while the bear market phase (the corrective wave) has three waves. Chart 1 and chart 2 show the above fundamental concept of an Elliott Wave.

    Chart 1

    (click to enlarge)

    Chart 2

    (click to enlarge)

    In a downtrend, the bear market phase (the impulse wave) has five waves, while the bull market phase (the corrective wave) has three waves. Chart 3 and chart 4 depict the above fundamental concept of an Elliott Wave.

    Chart 3

    (click to enlarge)

    Chart 4

    (click to enlarge)

    In the case of the Athens General Index ASE:ATH, we can identify two different Elliott Wave counts. The first count is a bearish impulse wave and the second count is a bullish corrective wave. Let's start with the first count, the bearish impulse wave.

    In chart 5, we can see the weekly price action of the ASE:ATH Athens general index covering the bearish market move since 2008. We can make out a classic Elliott Wave pattern from the peak of 2008 until now (See chart 5).

    Chart 5

    (click to enlarge)

    This Elliott Wave count suggests that the impulse wave is almost complete. The last, 5th wave has not started yet so we should expect the final bearish move in the near future. The price will probably find resistance at the bearish trend line W1 and will move lower, retesting the lowest low value of 08th June of 2012. After the 5th, final wave is over; we can expect an "a, b, c" correction to higher price levels.

    In chart 6, we see again the weekly price action of the ASE:ATH Athens General Index, covering the bearish market move since 2008. If we forget for a moment the first count which we described earlier, another possible count can be identified. This time though we have a corrective wave of a bullish trend. The details can be seen in the chart 6.

    (click to enlarge)

    The second Elliott Wave count suggests that the corrective phase of a major bullish trend is now over and a new impulse wave develops.

    We are now near a critical price level, because the bearish trend line W1 is a very strong resistance line. If the price breaks the trendline upwards, we can be more confident that the second Elliott Wave count is in progress. On the other hand, if the price finds resistance at the trendline w1, then we can consider the first count valid. Either way, unless the price breaks the bearish trendline w1 upwards, it is not safe to consider initiating any long position.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Themes: Greece, Athens, Index
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