JPY, USDYEN Elliott Wave Analysis of USDYEN

I have often stated in this blog that we should use Elliott Wave Analysis to aid us in our trading decisions. Some people mistakenly believe that the goal of Wave Analysis is to make accurate predictions, and spend a great deal of time verifying i ftheir count is correct. I am also aware that some analysts showcase their wave-counting skills when things go right. Wave Times is different. I would like you to see how my wave count in USD/YEN was actually wrong, but the direction was right. I have no hesitation is accepting that my counts are often wrong, although it will become evident only with hind sight. My approach to the market is to use this invaluable tool in making the right trading decisions. Start by looking at my Elliott Wave update of 23 July 2012. (An easy way to get there is by looking at the menu, under Forex, and choosing JPY). In that update, I has suggested to sell the USD on any recovery for a move down to 77.20 and eventually down to 76.70. The USDYEN went up to 79.66 on 20 August and then came down to a low of 77.11. Note two things here. (a) it did not reach 76.70 and (b) in that update I had counted the waves as a 5-wave downmove. Both are wrong. But did it matter to the trader? Of course not. He/she knew that 77.20 was a good level, and some action needed to take place there. In today’s new update, I present you with an altogether new wave count of USDYEN.

You can see that I am now calling the 77.11 low as the wave 2 low. As you know, corrections can never be in 5 waves, so my July wave count was wrong 🙂 The next chart shows you how you could have figured out where the first wave up would end.

In the third chart, you can see how I am breaking down the third wave into its components. I am also pointing out how I decided that we are in an extending third wave. This is a delicate point that you should take time to understand. Supposing I had labelled the green wave 1 as the 3rd wave, then the subsequent decline would have overlapped the top of Blue wave 1. That would have made me bearish if I was only looking at wave counts. But I would have been hesitant to buy after that. But the sharp recover that followed left me in no doubt that an extension was beginning. I had actually called up my clients and told then that we are now entering a huge bull run in the USDYEN, and importers from Japan should now be patient as the Yen was going to weaken significantly. If you had read my book “Five Waves to Financial Freedom” I have covered this phenomenon. If you have a short wave 3 and an overlap followed by a sharp rally to a new high, get ready for an extended third wave!!

The final chart is a close up view of the extending third wave. I am looking for a move to 88.40 at least, but the path to that could invove a pull back. Don’t sell to capture this correction. Instead, be alert to buy at a good support. Around 84.80-85.00 is decent initial support. As always you need to have stops on any position, but if you get stopped, be willing to jump back into the bull camp the moment it starts steadying and moving up again. I wish you the best of luck. (By the way, I am going to be in India to conduct a private seminar in the third week of January. Just thought will let you know) -Ramki (PS I posted this via email, after testing it out last week! Not sure if the formatting will appear correctly though…so please bear with me)



25 Comments

  • Jim (Wolfhound on Twitter)

    Very helpful post….I am allowing for the series of 1,2, i,ii, (i), (ii)’s in your 4th chart at the 82 level to be wave iv of an extended wave 3 (of 3) which has now peaked at 423.6% 0f wave 1 (of 3). I would welcome your thoughts on this count which suggests wave 3 of 3 is now over. In any event, we shall know soon enough.

    Thanks.

    Jim

  • chauhan

    ramki sir
    thanks for your simple wave counting charts
    from your this post i have come to know you are a conducting some private seminar in india, i am from india gujrat.
    can i be part of that?

    its to gled to be with u

  • RainMaker

    Ramki,

    Thanks for the wonderful illustrations, it provides wonderful insight to third wave extensions.

    A bit of confirmation for my understanding.

    Once the price race past above the high of wave 1 (green) you anticipated that W3 is extending.

    Here now is a valid immediate buy with stop below the W2 (green) ?

  • rahul

    Ramki sir could you give us your short to mid term view on the Nifty please?

  • Chrystian Ramirez

    Hi, I am a fan of your analysis, i wanted to ask you what your thoughts were on fundamental analysis when it comes to trading. Do you only trade based on elliot waves or also look at economic calendars, news and that sort of fundamental information for your trading decisions?

    • Hi Chrystian, Even Ralph Elliott, the man who gave us the Elliott Wave Principle, recommends that we should be aware of the fundamentals. A person who recognizes the underlying fundamentals will make a more informed decision while counting waves. But Fundamental Analysis is different from knowing the underlying fundamentals. A fundamental analyst will be able to say that a company is making some valuable products, for example, and its valuation should be such and such. But the market drives the price based on a variety of factors, chiefly sentiment. EWP helps in understanding this latter part.So when I trade, I try to remember the underlying fundamentals but time my trade using EWP.Good luck.

  • Hi Ramki and all the best wishes for the new year.

    I have for a longer time been looking for at multiyear low i USD/JPY as it according to my analysis has completed a clear 5 wave down from the early 1970’ties when Bretton Woods collapsed. Furthermore we have a multiyear fourth wave triangle from 1985 to 2007 culminating in a wedgeshaped fifth wave to 75.35 in December 2011. If this analysis is proven right then USD/JPY should retrace to at least the fourth of one lesser degree which is also the apex of the triangle at 124-125 area. But as the correction relates to the entire downwave from early 1970’ties then it could mean that a correction to 124-125 is only wave A of a much larger upleg. My cyclical studies point to general dollar strength until 2016 from af cyclical low in 2011. But of course we will se occasional major corrections underway. The reverse head&shoulders bottum should mean that it will be hard to get USD/JPY under the 83 area now IMHO.

    Best regards,
    John Yde

  • lilly

    Hi Ramki. Happy new year!

    Thank you for your analysis of USD/JPY.

    I had thought this up movement from mid 2011 is 4th Flat correction of Big down trend However, it seems like incorrect count… after i read your analysis.

  • Trevor

    Dealers, who usually get it right, are massively long the Yen. 84500 contracts long as opposed to their short position of 9500 contracts. At major turning points in the unfolding triangle of the AUD they were at most times heading in the right direction. Is it not possible that we are seeing an ABC unfolding with the top at 88.40? How could we tell if that was the case?

  • Trevor

    Your book is not specific about a deep wave 4 correction in an extended wave, but you did hint at a possible 38.2% (sometimes).

  • Jim (Wolfhound on Twitter)

    Hi Ranki

    I posted this question somewhere but can’t find it now so I’ll just repost it. Your minimum target has been hit very accurately…I know that doesn’t mean wave 3 is over but can you say how you derived that minimum target. Thanks. Jim

    • Hi Jim, If you have read my book Five Waves to Financial Freedom, and many of my posts in this blog, you would know that I approach the market with an open mind, that anything is possible. I am also always aware that my count could be wrong, but it is more important to get the direction and targets correct than the labeling. So initially I said to myself that the move from 77.11 has finished a 3rd wave at 80.67 and we are seeing an extended 5th wave that is going to be 2.618 times the distance from 0 to 3. The 4th wave at that time was 79.06. You can figure out the target is 88.38. Once that was reached, and we started coming down, I change my counts to say that what we just was was a 3rd of the 3rd! Hey Presto. We now can trade the 5th wave up with confidence. And the target for that was 89.50 (we reached 89.35 I think, which is good enough for most traders)….and now I am free to change my labels again. Your key lesson here is that we should not focus on getting the count right. Let us leave that to the arm-chair analysts. Our aim is to convert our knowledge of Elliott Waves into tradeable ideas. WaveTimes.Net, my other website, tries to do that, but unfortunately, it is not free!

  • KB

    Hi Ramki,
    Great analysis,,

    This large intermediate wave 3 could target 96.48 223.6% intermediate waves 1 & 2, if my daily labelling is correct we have completed minor wave 3 of intermediate 3, (about now) so a correction back to the range of 87.90 to 90.40 (forth wave 1 lower degree) would/could be seen before we advance to a final high for minor wave 5 of our huge intermediate wave 3.
    As you always say, lets see what unfolds!
    I have a saying, you can only trade what you can see, if you can’t see it, your guessing. You cannot control return in this game, only risk.
    All the best,,

    • Hi KB, Thanks for writing. My suggestion would be to stick to your counts, and know in advance where you will be wrong. We will all be wrong in the big picture. The sooner you realize you realize you are wrong, the smaller your losses. Meanwhile, trade with your count. In the long run you will be hugely successful.

      • KB

        Thank you Ramki, This information you have given, has provided a “position” in the market to build from, for an Elliott Wave analyst, that is very very valuable indeed, ie you could now trade this pair for weeks/months, just think of the correction that will follow and the huge opportunies that will bring. keep up the great work,
        PS from the price action today, we could have started our decline to the 87.89 – 90.38 regoin, again no guarantees,

        Looking at your analysis of usdjpy has moved my analysis work forward yet again, there is always something more to learn..

  • KB

    well that didn’t work, my count/analysis was clearly flawed, we have seen a new high, time for a re-count,

    • KB, The exercise is beneficial if you could spot your error early enough to exit quickly.. By the way, I don’t remember your count, but just sharing the comforting words that we should never be scared to change our counts at the first sign of a violation of any rule. Good luck.

  • Dan

    Hi Ramki,

    On a daily USD/JPY chart on FXCM, I count wave (1) starting on 2/27/13, (2) starting 3/12/13, (3) starting 4/4/13, complex (4) starting on 4/11/13, extended (5)th starting on 5/2/13 – and ending on 5/22/13. Now on 6/5/13 I think we have reached the end of a wave A correction, with good support for a wave B launch back up at 99.00.
    I expect wave B to resume up now, not sure how high (maybe .618 fib extension of wave 1) and then for wave C to fall and reach the target of 97.500.

    Should I be drawing fib extensions of wave 1 for my wave B targets, or now that I am in correction phase A-B-C, I should be drawing fib retracement levels of wave A and expect wave B to hit one of those?

    Too bad we can’t post pictures on this web site. Thanks for any advise. I am new to Elliott.

    • Dan, I think you are on the right track. You should draw fibs from both wave B end as well as retracements of prior rally. Then use the methods taught in FWTFF book to determine end point of wave 5 of wave C. Al the best

  • Prabh

    Dan,

    You can’t upload pictures on current website but you can upload images on any third party images site and share the link on this website.

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