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Trading

Popgun – A Two-Bar Pattern that Points to Trade Setups

Trader Education Week begins September 26
September 25, 2012

By Elliott Wave International

Some people like to get outside on the weekends, maybe playing tennis or working in the yard. Some people like to visit their friends or cook a big meal or go out to see a movie. And some people who are passionate about their work — such as Elliott Wave International’s (EWI) analyst Jeffrey Kennedy — like to stare at hundreds of price charts on their computer screen to find patterns that point to trade setups. We used to worry for his health but not anymore, because he’s been doing it for years and he comes up with some amazing trading lessons. Enjoy this lesson on bar patterns from EWI analyst Jeffrey Kennedy.

[Editor’s note: Elliott Wave International is hosting Trader Education Week, September 26 through October 3. During this event, analyst Jeffrey Kennedy will share video trading lessons that will empower you to improve the way you trade.]


The Popgun
I’m no doubt dating myself, but when I was a kid, I had a popgun — the old-fashioned kind with a cork and string (no fake Star Wars light saber for me). You pulled the trigger, and the cork popped out of the barrel attached to a string. If you were like me, you immediately attached a longer string to improve the popgun’s reach. Why the reminiscing? Because “Popgun” is the name of a bar pattern I would like to share with you this month. And it’s the path of the cork (out and back) that made me think of the name for this pattern.

The Popgun is a two-bar pattern composed of an outside bar preceded by an inside bar. (Quick refresher course: An outside bar occurs when the range of a bar encompasses the previous bar and an inside bar is a price bar whose range is encompassed by the previous bar.) In Chart 1 (Coffee), I have circled two Popguns.

So what’s so special about the Popgun? It introduces swift, tradable moves in price. More importantly, once the moves end, they are significantly retraced, just like the popgun cork going out and back. As you can see in Chart 2 [not shown], prices advance sharply following the Popgun, and then the move is significantly retraced. In Chart 3 [not shown], we see the same thing again but to the downside: prices fall dramatically after the Popgun, and then a sizable correction develops.

How can we incorporate this bar pattern into our Elliott wave analysis? The best way is to understand where Popguns show up in the wave patterns. I have noticed that Popguns tend to occur prior to impulse waves — waves one, three and five. But, remember, waves A and C of corrective wave patterns are also technically impulse waves. So Popguns can occur prior to those moves as well.

As with all my work, I rely on a pattern only if it applies across all time frames and markets. To illustrate, I have included two charts of Sirius Satellite Radio (SIRI) that show this pattern works equally well on 60-minute and weekly charts. Notice that the Popgun on the 60-minute chart [not shown] preceded a small third wave advance. Now look at the weekly chart [not shown] to see what three Popguns introduced (from left to right), wave C of a flat correction, wave 5 of (3) and wave C of (4).

There’s only one more thing to know about using this Popgun trade setup: Just be careful and don’t shoot your eye out, as my mom would say.


A FREE trading event that will teach you how to spot trading opportunities in your charts

Elliott Wave International is hosting a free Trader Education Week, Sept. 26 through Oct. 3. Register now and get instant access to 4 free trading resources from EWI analyst Jeffrey Kennedy — plus you’ll receive more lessons from Jeffrey as they’re unlocked each day of the event.

Don’t miss this opportunity to learn how to spot trading opportunities in the markets you follow. Register Now >>

This article was syndicated by Elliott Wave International and was originally published under the headline A Two-Bar Pattern that Points to Trade Setups. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

The Next Major Disaster Developing for Bond Holders

Announcements: Robert Prechter and the folks over at Elliott Wave International have just released an urgent new report for bond holders and mutual fund investors. Prechter’s report, The Next Major Disaster Developing for Bond Holders, is the first of its kind from EWI. Never before has the world’s largest technical analysis firm published such extensive research and analysis on bonds for non-paying readers. This is a unique opportunity to see what Prechter’s subscribers see, and protect your investments without committing to a paid subscription. Learn more about Prechter’s 10-page report on the developing risks in bonds now — it’s yours for free.


If you have money in mutual funds, Treasury bonds, municipal bonds or high-yield bonds, Robert Prechter has just issued a crystal-clear warning for you: Your money could be at risk.

Prechter, the famed market forecaster who specializes in Elliott wave analysis, sent similar warnings about the Nasdaq in 2000, real estate in 2006, the blue chips in 2007 and commodities in 2008. His forecasts proved deadly accurate.

In trademark fashion, Prechter now has his readers focused on something most mainstream investors, analysts and advisors are taking for granted: the safety and stability of the bond market.

Why worry about the safety of bonds, you ask? A recent USA Today article reported that investors put a “record-shattering” net $376 billion into bond mutual funds in 2009, and individual investors and mutual funds are “still showing the love” in 2010.

After such explosive growth, Prechter says bond investors have been pushed to the edge of a mile-high cliff. Millions of investors are just one step away from tumbling over the edge.

If your hard-earned savings are exposed to the developing risks in these markets, you owe it to yourself to heed Prechter’s urgent warning.

Download your free copy of Robert Prechter’s new 10-page report, The Next Major Disaster Developing for Bond Holders, now — it’s free.


About the Publisher, Elliott Wave International

Founded in 1979 by Robert R. Prechter Jr., Elliott Wave International (EWI) is the world’s largest market forecasting firm. Its staff of full-time analysts provides 24-hour-a-day market analysis to institutional and private investors around the world.

The #1 Reason Why Gold Collapsed

by Adam Hewison

Following the gold market as we do here at MarketClub, it was amazing that nobody, and I mean nobody, was bearish on this market. This always creates a problem as the markets tend to reverse when everyone is on one side and there’s no one else left to buy.

Another tip-off was on Fox Business News and also on CNBC indicating that gold was going to hit $1400 almost immediately. Well after Tuesday, we know what was to happen to the price of gold. If gold were so strong, should it really have gone down almost $70 in 4 days?

This is where technical analysis and Japanese candlestick charts really shine in my opinion. What happened in gold was a classic candlestick formation that any trader, whether they trade gold or other markets, should be aware of.

In this short video, I illustrate how this formation occurred and how it was confirmed the next day – and I don’t mean on Tuesday.

I also have a free candlestick book that I’m making available along with this video.

October Curse vs. Objective Analysis: The Choice Is Yours

October 12, 2010

By Elliott Wave International

Over the weekend, I went shopping for Halloween decorations. In the store, one of the clerks was wearing a white T-shirt with a puff-paint rendering of the Dow Jones Industrial Average. The line representing prices was the color of blood red, dripping and splashed across the front. When I asked him what it was, he said “the October Curse.”

‘Tis the season of stock market adages; those age-old Wall Street platitudes that claim stock prices perform a certain way during certain months of the year. The problem is, such correlations are hardly a guarantee.

Take October, for example. Yes, this month has marked some of the darkest periods in stock market history: 1929, 1987 and on. Historically, however, it’s not the worst performing month. For example, the supposed “Halloween Jinx” failed to bring a deathly pallor to stocks in 2008, as the final days of that year’s October saw the biggest weekly gain since 1974.

Remove Dangerous Mainstream Assumptions from Your Investment Process. Elliott Wave International’s FREE 118-page Independent Investor eBook shows you exactly what moves markets and what doesn’t. It will change the way you invest forever. Click here to learn more and download your free, 118-page ebook.

Then there are these familiar saws of seasonal wisdom:

“As Goes The First Week of January, So Goes The Month”– In the first week of January 2010, the stock market enjoyed a powerful winning streak. Yet, by the end of the month, prices were back in the red, circling the drain of a two-month low.

“Sell In May And Go Away” — And don’t come back ’till St. Leger’s Day (September). If investors heeded this wisdom this year, they would have missed one of the strongest uptrends in stocks of the entire year from July to September.

“September Curse” — If you think October is supposed to be bad, September is widely assumed to take the financial killing cake. Yet this year, U.S. stocks enjoyed their strongest September in 71 years!

Bottom line: Don’t “buy” your trading strategy before the trend actually arrives. The choice comes down to old adages, or objective analysis. Pick the latter.

Remove Dangerous Mainstream Assumptions from Your Investment Process. Elliott Wave International’s FREE 118-page Independent Investor eBook shows you exactly what moves markets and what doesn’t. It will change the way you invest forever. Click here to learn more and download your free, 118-page ebook.

This article was syndicated by Elliott Wave International and was originally published under the headline October Curse Vs Objective Analysis: The Choice Is Yours. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

EWI’s Newest Service Picks ETFs: Interview with the Editor

EWI’s Wayne Stough adds another Flash opportunity service to the line-up: ETFs
October 7, 2010

By Elliott Wave International

Every trader or active investor at times wishes they could pick the brain of a pro that has “pulled the trigger” on real-money trades before.

EWI Director of Analysis Wayne Stough is one of these pros. For several years, several times per month, he’s been alerting his Flash service subscribers to opportunities in futures markets.

And now, there is a new addition to the Flash service line-up: ETF Opportunity Flash. We caught up with Wayne in his office and asked him a few questions:

Q: What method do you use when looking for high-probability trade set-ups?

Wayne Stough: My main approach is The Elliott Wave Principle. I look for clean, precise wave counts — usually ones that other analysts can confirm, so there is a general consensus on market direction. Once the market meets my other criteria for a high-confidence trade, I send out a Flash recommendation to my subscribers.

Q: How do you define a “high-confidence” trade?

WS: That’s a good question, because no market forecast is ever guaranteed, whether you use Elliott or some other forecasting method. Having said that, there are definitely moments when probabilities (or odds, if you will) strongly suggest a particular move. For example — and this is just basic Elliott — the Wave Principle says that markets move in a series of five waves in the direction of the larger trend (labeled on a chart 1, 2, 3, 4, 5) and three waves against the trend (labeled A, B, C). Also, there are certain proportions between these waves that markets often adhere to. So whether I’m counting a 1, 2, 3, 4, 5 pattern in a rally or a decline (i.e., in a bull or bear market), I focus on where the fifth wave should end, according to Elliott wave guidelines.

Once I’ve identified that price termination point, it becomes a matter of waiting for the market to get there. Fifth waves come at the end of the pattern and are usually weaker than third waves. So once I see certain technical indicators diverging (e.g. the RSI), my confidence grows: We are near the end of the pattern, and prices are about to reverse. That’s just one example of a high-confidence situation. But I do suggest a protective stop with every new Flash alert, in case the forecast doesn’t come true.

Q: Are you aiming for a particular percentage gain?

WS: Absolutely. When I send a Flash alert, I’m typically looking for a 3-to-1 ratio, at a minimum.

Q: Does that always work out?

WS: No. I monitor the recommendation for warning signals that let me know when a different scenario is unfolding in the charts. In those cases, I send out another Flash alert suggesting to lower or raise the stop-loss level, or exit the recommendation entirely.

Q: They say you love the S&P Mini as a trading vehicle. Why?

WS: I’d put it differently. I have traded the S&P for a long time, I understand that market’s nuances, and I like the leverage and volatility. But while the S&P comes naturally to me, I’ve also made many Flash recommendations on other markets, like gold and currencies. So, a better way would be to say that I love any market that gives me the desired risk-reward ratio. Now I’m also “looking for love” among various ETFs.

Special Introductory Offer: Get ETF Opportunity Flash now and have 2nd month FREE. Details.

Q: If traders expect a bear market, should they still consider Flash Services?

WS: Absolutely. I think we’re at the cusp of something very big in the stock market. And this is the time to act. Just keep in mind that speculating in severe bear markets (or during extreme volatility) carries additional risks. So be sure you do your research and know how your financial instruments behave under these conditions. And anyone who chooses to trade in this environment must only risk the money they absolutely can afford to lose.

Q: Who do you think should consider subscribing to EWI’s Flash Services — including the newest addition, the ETF Flash?

WS: Anyone who has some risk capital but not enough time or experience to find their own opportunities. Anyone who understands and accepts the fact that when you bet your money, there will be winners and losers. (Sometimes more of one than the other.) Anyone who knows better than to risk all their capital on a single recommendation; the old “all eggs in one basket” situation. I think in terms of quarters: I want all my subscribers smiling at the end of a quarter.

EWI ETF Opportunity Flash service now brings you potential high-probability opportunities in exchange-traded funds (ETFs). Don’t miss this special offer.

This article was syndicated by Elliott Wave International and was originally published under the headline EWI’s Newest Service Picks ETFs: Interview with the Editor. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Robert Prechter: Ominous Pattern in the DJIA – Video (Part 2)

Video (Part 2): Prechter: Ominous Pattern in the DJIA

(Note: This interview was originally recorded on September 20, 2010)

In the video below, Robert Prechter talks to Yahoo! Finance Tech Ticker host Aaron Task and Henry Blodget about a technical pattern he sees forming in the Dow.


Get Up to Speed on Robert Prechter’s Latest Perspective — Download this Special FREE Report Now.

Robert Prechter On Market Rally: Part 1


Video (Part 1): Prechter On Market Rally

(Note: This interview was originally recorded on September 20, 2010)

In the video below, Robert Prechter talks to Yahoo! Finance Tech Ticker host Aaron Task and Henry Blodget about extreme readings in various indicators that confirm his bear-market forecast.


Get Up to Speed on Robert Prechter’s Latest Perspective — Download this Special FREE Report Now.

S&P 500: Did the “Death Cross” die?

The sharp upward rally in the S&P 500 surprised many people, myself included. However, the rally did not change the “Death Cross” which we pointed out as being a negative and significant market event that does not occur very often.

This market’s rally also did not change our weekly and monthly “Trade Triangles” which are still red and indicating that the trend is headed lower.

In this short two minute video, I show you some other aspects of the S&P 500 that I think you should be watching.

As always our videos are free to watch and there are no registration requirements.

I would love to hear your comments about this or any of our other market videos.

Watch the video here: Did the “Death Cross” die?

Adam Hewison

Last Chance: Take Advantage of this powerful trading combo

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* How to use the ‘Smart Scan’ feature to help you find your next trade

* How the ‘Trade Triangles’ will tell you when to pull the trigger on a trade

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* How to access their dedicated customer support team (they can explain all of the features of the system and walk you through it online OR on the phone).

If you have already signed up for the trial, but not the webinar here’s the link:

MarketClub Webinar

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* How to use the ‘Smart Scan’ feature to help you find your next trade

* How the ‘Trade Triangles’ will tell you when to pull the trigger on a trade

* How “Instant Alerts’ will keep you ahead of any unexpected moves (and send you an email if your ticker crosses over certain ‘parameters’ as well)

* How to access their dedicated customer support team (they can explain all of the features of the system and walk you through it online OR on the phone).

This offer won’t be live for long don’t miss your chance to test drive one of the greatest values in trading while it lasts:

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