By Wong Kon How
The Rule for First Wave in Elliot Wave Theory
Here are the two key points:
· The first wave often develops after a significant market low, marking a reversal in trend direction.
· It is typically triggered by a shift in market sentiment, such as new economic data, policy changes, or geopolitical events.
As long as the 2024 low is not breached, there is potential for a third wave to form. The first wave aligns well with the principles of Elliott Wave Theory.
Source: TradingView
Are Chinese Stocks Entering Their Second Wave?
According to Elliott Wave Theory, the second wave must not retrace 100% of the first wave. If it does, the first wave is invalidated, indicating that the larger trend has not changed.
An example we analyzed on 20 September 2022 was Yangzijiang Shipbuilding. With fundamental considerations and the formation of its first wave, we identified its growth potential.
Source: TradingView
The entry point can be during the first or second wave, provided the stock is trading at a fair value and exhibits growth potential. This aligns with the objective of capturing the third wave in Elliott Wave Theory. Currently, the stock is riding its third wave (see the chart below).
Source: TradingView
Top 20 Singapore Stocks with Over 50% Revenue from Greater China
Source: SGX
If you believe that the third wave for the Chinese market is taking shape, investing in Singapore-listed stocks with significant revenue derived from Chinese markets could be a viable alternative. As noted, many of these stocks, as listed above, are currently in their retracement or second wave phase. Could a potential third wave be on the horizon?
This article was first submitted to CMC Markets on 3rd December 2024 for publication. Here's the link.
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