Philippines Stock Exchange an Elliott Wave Tutorial

The movements of the Philippines Stock Exchange Index (PSEI) in 2023 have been textbook Elliott wave patterns.

The daily PSEI chart courtesy of Trading View provides lessons in learning the Elliott wave theory.

The first step in Elliott analysis is breaking price movements into segments.  In this case the first segment to examine is the January 2023 to March decline.  We can see that most of the countertrend movements are tiny, this is a characteristic of the main trend.  Price moves in a smooth and direct manner. 

Note that there are two significant counter trend moves labeled Minute waves “ii” and “iv” – boxed.  This forms the basic five – wave Elliott pattern.  Of particular interest, Minute wave “iv” does not overlap into the territory of Minute wave “I”.  This is an example of an Impulse wave, which is one of three types of Motive waves, the other two are Ending and Leading Diagonal Triangles.

Most of the time the third wave of an Impulse pattern is the longest sub wave.  In this case Minute wave “iii” is the longest wave.   The third sub wave of any Motive pattern is never the shortest.   

After completion of the five – wave pattern labeled Minor wave “1” there’s a clear three- wave rally – a Single Zigzag.        

After the Single Zigzag terminates the decline resumes.   However, note the choppiness.  Compare the May to June drop with Minute waves “I”, “iii”, and “v” of the January to March drop each  of which had only tiny counter trend moves.  The May to June drop has several relatively large counter trend moves.  In the  later drop the bulls are putting up a stronger fight.

Also, note the angle of the January to March drop of 53 degrees vs. the 35-degree decline in the May to June drop.   Shallow and choppy declines/rallies are usually characteristics of corrective patterns.  In this case the May to June drop is correcting the upward progress of the March to May Single Zigzag.

Subsequent to the 06/22/23 low there’s been a three-wave rally.  This could be another Zigzag,  the second of a potential Double Zigzag pattern.  If so it could terminate somewhere near or just above the 05/08/23 peak.  

If there’s a peak in the target zone the downtrend is likely to resume.  The minimum downside target is the October 2022 bottom around the 5,700 area.