How we analyze: Elliott waves and Fibonacci, automated

The process in six steps

1. 1

   Price data

   The basis is the closed candles of each symbol – stocks and precious metals from a market data provider, cryptos from a major exchange. A candle that is still forming never counts: every analysis only sees what is already settled.

2. 2

   Turning points (ATR zigzag)

   A high or low only counts as a turning point once price has moved away from it by a fixed multiple of the ATR – 2 to 4 times, depending on the timeframe. The ATR (Average True Range over 14 candles) measures the usual range of movement, so the threshold fits calm and volatile symbols alike.

3. 3

   Wave count by fixed rules

   We fit an Elliott count onto the turning points. Hard rules must never be broken:

   • Wave 2 never falls below the start of wave 1.
   • Wave 3 is never the shortest of waves 1, 3 and 5.
   • Wave 4 does not overlap the territory of wave 1 (exception: diagonals).

   Guidelines – such as typical Fibonacci ratios between waves or the alternation between flat and sharp corrections – decide which of several permitted counts we show. The analysis chart then says, for example, “3 of 3 guidelines”.

4. 4

   Fibonacci buy zone

   After an advance (wave 1) we measure the pullback (wave 2): the buy zone lies at 61.8–78.6% of the advance, measured down from the high. Only a candle close above the last swing high shows that wave 3 could be starting.

5. 5

   Stop below the start of wave 1

   The stop sits below the start of wave 1, at a distance of 0.5 × ATR. If price closes below the start, the count is invalid and the setup is void.

6. 6

   Target 1 and Target 2

   Target 1 is at 161.8% of the length of wave 1, measured from the end of wave 2 – the rule closes a quarter of the position there. Target 2 is at 685.4%. After target 1 the stop for the rest moves up, usually to the high of wave 1.

   Stop and targets for each symbol are shown from Watcher.

Timeframes

• 4H

  Live analysis

  The rule runs on 4-hour candles for stocks, cryptos and precious metals. This is where the screener’s buy zones come from.

• 1D · 1W

  Overview

  Daily and weekly candles show the same method on a larger timeframe – to place the symbol in the bigger cycle.

• 1H

  Close-up

  Hourly candles show the last few days in detail.

Further analysis methods

Besides Elliott + Fibonacci you can switch between further methods in the screener and on every symbol page. Each follows its own fixed rules; we show zone, stop and targets, but no statistics for them.

• Gap with volume

  Gap up on heavy volume (usually after earnings)

• Double bottom

  Reversal pattern with a breakout above the neckline

• Pullback in trend

  Pullback to the 50-day line in an intact uptrend

• 52-week-high breakout

  Breakout to a new 52-week high on heavy volume, retest as the zone

• Fundamentals

  Growth, margin and debt compared with the sector (stocks)

How often we update

• Stocks: twice per trading day, after the 4-hour blocks 9:30–13:30 and 13:30–16:00 New York time.
• Cryptos: every four hours, around the clock.
• Precious metals: after every 4-hour block on trading days.
• Analysis charts on 4-hour and hourly candles: every hour, as soon as a new candle has closed.
• Further methods: once a day; fundamentals after new company filings.
• Without an account and on the free plan, new buy zones appear 2 days later; from Watcher immediately.
• Every symbol page shows at the top when the analysis is from.

Foundations

• Elliott Wave Principle

  A model described in the 1930s: prices move in impulses of five waves and corrections of three waves. Our hard rules and guidelines are the commonly used ones of this model, in our own words.

• Fibonacci ratios

  Levels such as 61.8%, 78.6% and 161.8% are derived from the Fibonacci sequence and have been widely used in technical analysis for decades.

• ATR (Average True Range)

  A measure of a symbol’s usual range of movement, a standard of technical analysis since the 1970s.

Learn Elliott waves and Fibonacci in the Academy All analyzed symbols