Sunday, August 16, 2009


The Elliott Wave Principle is best applied to large indexes/commodities where there is mass participation by the investment community. EWP generally states that counting waves for individual stocks is not recommended or worth the effort unless there is an unmistakable wave pattern developing.

I believe I may have spotted such a pattern with RIMM. I will say this, in the chart above, I did not attempt to nail down the exact wave degree for my labels. What I think is more important for a trade in the near/intermediate term is that a zigzag pattern is developing with wave C in progress (Or a wave 3 of a larger impulses) Either way, both would imply that we can expect to see a 5 wave pattern down for RIMM.

There are 3 main points that I want to highlight for RIMM's current situation:

1. As I mentioned above, there is a clear zigzag (ZZ) in progress (Or again like I stated, I can also count a new 5 wave impulse decline, but I won't do that yet because this would imply RIMM may fall to $15/share, which would take it back to it's 2004 price. However, this is something to consider if P3 in the SPX is as large as anticipated and this would fall right in line). Anyway, sorry for digressing.

Going back to the ZZ. A ZZ structure counts as an ABC pattern with a 5-3-5 subwave structure. Blue wave A shows 5 clear subwaves in red (lower roman numerals). Blue wave B is a very clear abc subwave. What remains is wave C and that should consist of 5 subwaves.

So far with the pullback from Wave B (blue) it looks like Wave C may have traced out subwave 'i'. Subwave 'ii' of C is in progress or may be complete. I would expect subwave iii, iv and v to take RIMM lower.

I used the common Fibonacci relationships when it comes to Waves A and C to highlight potential price targets as follows:

Wave C = .618 x A = $66.66
Wave C = A = $57.9
Wave C = 1.618 x A = $43.91

2. Head and Shoulders Formation

Don't know why but I've just been on the lookout for this formation lately. To me for some reason this pattern is sticking out. Take it for what it is but what I find interesting is that if you take the expected price movement should this H&S play out (measured by top of head to bottom of neckline), it falls right at the equality relationship for wave C and A.

3. April Price Gap

If price were to return to the $57 level, this would fit in nicely with price closing the gap, which is something to be expected.

I think for fun I will make a bold prediction and say that RIMM will trade back down to $57-58 by the end of the month. Why the end of the month. No real reason other than the fact that Blue wave A and B both took about 1 month to develop so I figured Wave C may already be halfway there.

Let's see what happens


  1. Wavetrader--

    THANKS MUCH for your elegant charts and your elegant analysis. Very much appreciated.

  2. thank you jhnewman. i'll be curious to see if this pans out. my first count on an individual stock.

  3. Wavetrader--

    I hope it works out for you too. As for me, I'm hoping your SPX count works. I'm big short at the moment -- with stops of course.

    Do you see what is happening in Asia? Big down day. Because of our down day on Friday, and weak consumers here + Japan's second quarter GDP came in under expectations (+.9% v. +1.0% expected). So I think that red is coming our way, and will make your count a reality. From my lips to God's ear, huh?

    By the way, you might be interested in learning a very accurate technical analysis technique called Hidden Pivots. It's sort of a simplified, and apparently more practical, version of Elliott Wave. I haven't learned it myself, but have frequented the chat room, and a lot of very good traders there swear by the UNCANNY accuracy of this approach. Check it out: Google "Rick's Picks" All the best to you!

  4. Here's the link. Check out the "About" tab:

  5. By the way, Rick is a VERY savvy trader...used to be an options market maker on the Pacific Exchange. And the chat room is filled with many savvy traders, very friendly, and willing to help someone learn the Hidden Pivot system.

    The other technique that many of them swear by is median forks. A lot of them seem to combine the 2 systems. I'll get you a link for that.

  6. Median lines (forks) is taught by Timothy Morge:

    Finally, do you know about the DeMark indicators? As I understand it, it's supposedly THE best secret weapon out there...used a lot by the best insitutional traders. Check out the books by Thomas DeMark, and especially the book: "DeMark Indicators" by Jason Perl.

    As I understand it, these are the best PREDICTIVE indicators in the world. DeMark is apparently an incredible TA genius. And part of why this might interest you is that he apparently developed some rules to make Elliott Wave more objective and less subjective. That book above has a chapter titled "TD D-Wave." I don't think you can read that and just apply it to Elliott Wave. I think you have to understand the DeMark indicators and get them on your system and then start using them in conjuction with EW...if that's what you want.

    So you see, I know a lot about some of the best techniques...I just don't have the time or money right now to learn them myself. LOL!!

    Good luck to you.

  7. sounds interesting. thanks for the tip!

  8. The Nikkei down almost 3% at midnight CST! I'll bet it spreads to Europe, and then the U.S., and triggers your head & shoulders. If so -- CONGRATULATIONS!

  9. WaveTrader--

    GREAT CALL on SPX (and RIMM). Congratulations again! I hereby award you the Purple Order of the Wave -- First Magnitude. (I don't know where I get the authority for this -- but there it is!)

  10. jhnewman,

    thx. i guess lightning does strike twice!:)