Euro: Look at This Head & Shoulders Chart Formation

Learn about the "head and shoulders" measuring formula

By Elliott Wave International

You are probably familiar with the classic "head and shoulders" chart pattern.

But, in case you need a refresher, here's a brief description of a head and shoulders top:

The high of an initial upward move is the left shoulder. After a decline, another upward move takes prices to a higher high, or the head. A second decline follows the head. A third rally then takes prices to a peak below the high of the head, and becomes the right shoulder. The left and right shoulders are often similar in duration and extent. A trendline connecting the two lows is called the neckline. When prices penetrate the neckline, a change of trend is believed to have occurred.

Head and shoulders bottoms also occur and the same description applies except in reverse.

This head and shoulders measuring formula -- showing a top as an example -- provides even more insight. The commentary is from a past issue of Elliott Wave International's Trader's Classroom:

To identify a high-probability price target for the move following the break of the Neckline, measure the distance between the Head and the Neckline and then project that distance down from the point at which the Right Shoulder breaks the Neckline.

The July 2021 Global Market Perspective, a monthly publication which provides coverage of major global financial markets, applied this knowledge to a forecast for the euro.

The chart on the left is from that July issue of the Global Market Perspective and the chart on the right was updated for the December Global Market Perspective. Here's what the December Global Market Perspective said:

A relentless four-month decline pulled the euro slightly below our downside target of $1.1263 on November 19, as these before-and-after charts show. On November 24, the euro bounced from its $1.1185 low. ...

You can learn about other classic chart patterns by reading Frost & Prechter's Elliott Wave Principle: Key to Market Behavior. Here's a quote from the book:

The Elliott Wave Principle not only supports the validity of chart analysis, but it can help the technician decide which formations are most likely of real significance.

Get the details of how the Wave Principle "supports the validity of chart analysis" by reading the entire Wall Street classic for free!

That's right -- you can get unlimited and free access to the online version of Elliott Wave Principle: Key to Market Behavior by simply joining Club EWI -- the world's largest Elliott wave educational community.

Don't worry -- Club EWI members are not under any obligations -- yet, members do enjoy free access to a wealth of Elliott wave resources on investing and trading.

Current resources available to Club EWI members include the report, "Crypto Trading Guide: 5 Simple Strategies" and the new video offering "Apply This Technique to Stop Rushing into Trades."

Plus, as mentioned, free access to Elliott Wave Principle: Key to Market Behavior (just click on the highlighted link to have this Wall Street classic on your computer screen in moments).

This article was syndicated by Elliott Wave International and was originally published under the headline Euro: Look at This Head & Shoulders Chart Formation. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Insights into a "Remarkable" NASDAQ Development

Here's what usually happens in the stock market when "the troops abandon the generals"

By Elliott Wave International

You've probably heard the phrase: "Appearances can be deceiving."

In other words, it's usually wise to "take a closer look" because the truth may not be obvious.

This applies to various circumstances of life -- even the stock market.

For example, consider this Nov. 19 Reuters headline:

Nasdaq hits fresh record peak ...

Of course, the headline appears to support a bullish outlook on the tech-heavy index.

However, after the market close that day, our U.S. Short Term Update showed this chart and said:

This remarkable chart encapsulates the current state of affairs. The top graph is the NASDAQ Composite from December 2020 and the bottom graph is the daily number of new 52-week lows for the index. Normally, as one would expect, when the NASDAQ declines, the daily number of members that make new 52-week lows increases. Yet, as the NASDAQ was making a new all-time high yesterday (NDX), the number of new 52-week lows surged to 425. This is the highest number of daily new lows since the market meltdown of February-March 2020. It vividly shows how concentrated the stock market rally is, with only a select number of issues pushing the NASDAQ higher. When the troops abandon the generals in the charge up the hill, retreat usually follows. [emphasis added]

The Nov. 21 U.S. Short Term Update followed up by showing this chart and saying:

In [the Nov. 19] Update we showed a chart of the extraordinary behavior in the number of 52-week lows on the NASDAQ. As the NASDAQ was in the process of rallying to new highs last week, the number of new 52-week lows outpaced the number of new 52-week highs for five consecutive days. Tonight's chart shows the same new low data but uses a 5-day average to accentuate the trend. "There's never been another day when so many stocks fell to new lows as the overall index climbed to a record high" in data going back two decades [referencing Nov. 18].

The new lows surge in conjunction with the NASDAQ's new high was just one indication that investors should prepare for downside price action.

The Elliott wave model is among the other indications.

Right now, the stock market's wave structure is sending a clear message that will likely be of high interest to you. Suffice it to say, this message is nothing less than historic.

If you'd like to delve into the details of how the Wave Principle can help you forecast financial markets, you are encouraged to read Frost & Prechter's Wall Street classic, Elliott Wave Principle: Key to Market Behavior.

Here's a quote from the book:

After you have acquired an Elliott "touch," it will be forever with you, just as a child who learns to ride a bicycle never forgets. Thereafter, catching a turn becomes a fairly common experience and not really too difficult. Furthermore, by giving you a feeling of confidence as to where you are in the progress of the market, a knowledge of Elliott can prepare you psychologically for the fluctuating nature of price movement and free you from sharing the widely practiced analytical error of forever projecting today's trends linearly into the future. Most important, the Wave Principle often indicates in advance the relative magnitude of the next period of market progress or regress. Living in harmony with those trends can make the difference between success and failure in financial affairs.

Good news! You can read the entire online version of Elliott Wave Principle: Key to Market Behavior for free!

All that's required for free access is a Club EWI membership. Club EWI is the world's largest Elliott wave educational community and is free to join. Plus, members enjoy complimentary access to a wealth of Elliott wave resources on investing and trading without any obligations.

Follow this link for free and unlimited access to the book: Elliott Wave Principle: Key to Market Behavior.

This article was syndicated by Elliott Wave International and was originally published under the headline Insights into a "Remarkable" NASDAQ Development. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Has Crypto-Mania Finally Run Its Course?

Here's a high-profile parallel between tech- and crypto-mania

By Elliott Wave International

When a company that's part of a major financial trend buys the naming rights to a professional sports stadium or arena, watch out!

History suggests that such a prominent move might be a sign that the fortunes of that company are about to dramatically change.

For instance, back in 1999-2000, technology shares were all the rage and one of the "highest of the dot-com high flyers," as the Wall Street Journal put it, was CMGI. It was the best performing U.S. stock from 1995 to 1999.

Well, in 2000, the firm bought the naming rights to the stadium of a major league football team.

The December 2021 Elliott Wave Financial Forecast, a monthly publication which provides coverage of major U.S. financial markets, showed this chart and elaborated:

The chart shows the stock market performance of CMGI, which is now known as Steel Connect. In August 2000, the company bought the naming rights to the home stadium of the New England Patriots for 15 years. Just two years later, in the wake of the dot.com bust, they were forced to relinquish their agreement.

Relatedly, in 1999, PSINet bought naming rights to the NFL stadium at Camden Yards in Baltimore. But, in 2002, the then internet services provider's name was removed from the stadium as PSINet went bankrupt.

Here in 2021, there appears to be a developing parallel between tech-mania and crypto-mania.

Here's a March 26 headline from the Miami Herald:

FTX, exchange for Bitcoin, wins Miami Heat arena naming deal

And this is another news item from Nov. 17 (fastcompany.com):

Crypto.com pays record price for naming rights to L.A.'s Staples Center

Of course, that's where the L.A. Lakers play and Crypto.com has agreed to fork over $700 million for a 20-year naming rights deal.

The December Elliott Wave Financial Forecast also showed this chart and said:

This chart shows Crypto.com's recent performance, with an arrow indicating the day they announced their coming stadium debut.

Will Crypto.com's price follow a trajectory similar to that of CMGI?

The Elliott wave method can help you to answer that question.

Frost & Prechter's Wall Street classic, Elliott Wave Principle: Key to Market Behavior, explains why:

The Wave Principle is governed by man's social nature, and since he has such a nature, its expression generates forms. As the forms are repetitive, they have predictive value.

Get detailed insights into the "predictive value" of the Wave Principle by reading the entire online version of the book -- 100% free.

All that's required for free access is a Club EWI membership. Club EWI is the world's largest Elliott wave educational community and is free to join. Members enjoy free access to a wealth of Elliott wave resources on investing and trading without any obligation.

Just follow this link for free and unlimited access to Elliott Wave Principle: Key to Market Behavior.