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 futures 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 neat stuff. A case in point is
his discovery of a two-bar pattern that he named the Popgun.
Find out more in this excerpt from the Club EWI eBook, called
How to Use Bar Patterns to Spot Trade Setups.
Excerpted from How
to Use Bar Patterns to Spot Trade Setups by Jeffrey Kennedy
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.
with a definition, illustrations of its form, lessons on its
application and how to incorporate it into Elliott wave analysis,
historical examples of its occurrence in major commodity markets,
and ultimately — compelling proof of how it identified swift
and sizable moves.
Best of all is, you can read the entire, 15-page report today
at absolutely no cost. You read that right. The “How
To Use Bar Patterns To Spot Trade Setups” is available
with any free, Club EWI membership.
This article was syndicated by Elliott Wave International.
EWI is the world’s largest market forecasting firm. Its staff
of full-time analysts lead by Chartered Market Technician Robert
Prechter provides 24-hour-a-day market analysis to institutional
and private investors around the world.
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