Under the Extended Elliott Wave Theory framework that we use, trendlines can be useful for determining the wave counts, as well as setting proper minimum goals.
Recently, the German main index DAX30 (DAX 30) hit a minimum criteria, so while we do some self-promotion, let’s also have a look at the technique briefly.
First, here’s how our DAX30 page looks like, before today’s analysis update:
As can be seen, around the 12th of July, the only selection of wave counts that were allowed at that time, pointed out that a certain market trendline had to be tagged, for the DAX index to fulfill important minimum distance criteria required by all wave counts.
In other words, a confluence of factors more or less made the trendline a minimum target with a very high probability of attainment. The markets vary greatly in predictability, but they sometimes present very likely development alternatives.
So to summarize the technique, without giving away too many of our secrets, what you want to do is this:
– Keep track of IF formations that require certain trendlines to form (mostly triangles and impulses) might be eligible patterns at that position in the larger wave structure.
– Keep track of other possible minimum targets that lie beyond or at the probable place where the trendline tagging/excess might occur.
– If several factors point towards the trendline or beyond, then you have a high probability for that trendline to be tagged or overshot by the market.