Does Elliott Wave Theory works at the time of any important news, important events, Govt. Policy decisions or other such important factors? This is the question asked by most of the traders/analysts and such similar questions like:

What is the effect of Important New and Govt. Policies on Elliott Wave Theory Analysis?

Does Elliott Wave Theory Analysis fails after sudden news and policy changes?

And one of such query I received recently from one of my follower. I am copying the same here:

Clarification on Clash of Elliott Wave Theory Analysis and Govt. Policies / Important / Important Events etc. (Must Read for new as well as experience traders, just read the whole story).

Today I received a query from a follower. I am copying the same.

“As I want to subscribe in your book but before this I want a Clarification as what will happen if any type of policies or situation you can say that of National, International, Political, RBI and government.
Take for example on Tuesday, 07 April 2015 RBI policy will be announced then what is the role of Elliott wave theory and by chance results of both clashes. Whether you will prepare the chart for coming Tuesday keeping in minds the next RBI policy? Please clear all above to me so that soon I can subscribe.”

My Answer is based on Real Time Practical Examples and not on just philosophical statements.

Actually you need to understand concept of Elliott Wave Theory before knowing its effects at the time of Important News, Events or Govt. Policy Decisions. In Simple words,

Whatever the event is going to be, there will be trading positions in the market before that event by mass participation and these trading positions will forms a pattern/structure on chart.

Elliott Wave Theory is to identify that pattern/structure, as there is no pattern/structure on charts which is not covered in EWT and every pattern have a personality which tells future moves. And these patterns will only suggest what move is going to happen next.

There is no importance of news in Elliott wave theory analysis and any Govt. Policy can never affect Elliott Wave Analysis. I never analyze Elliott Wave Theory by keeping important news in my mind. Even I never follow any news, events, data or any other technical indicators. Because there is no need as these waves tell everything in advance. News always comes after the action.

Let me give you a practical example on recent time:

RBI announced First Rate cut on 15 Jan 2015 Morning, and no one was aware of that.. and it was the analysis report I posted on 14 Jan 2015.

Nifty Charts are suggesting 8445 in Coming Sessions – EW Analysis dated 14 Jan 2015

Below is the chart from this Elliott Wave Analysis Report of Nifty.

Elliott Wave Analysis of Nifty before RBI Rate Cut
Elliott Wave Analysis of Nifty before RBI Rate Cut

Nifty bounced 600 points after that. Read that report and see what EWT suggested a day before ( I alerted minimum 200 points up move).

RBI announced 2nd rate cut on 04 March 2015, and it was the report I posted at morning just after rate Cut.

Nifty Elliott Wave Analysis after RBI Rate Cut on 04 March

Below is the chart from this Elliott Wave Analysis Report of Nifty.

Elliott Wave Analysis Report of Nifty after RBI Rate Cut
Elliott Wave Analysis Report of Nifty after RBI Rate Cut

Read the report and see what Elliott Wave Theory suggested when whole world was bullish after RBI rate cut. Pattern on charts suggested a sharp fall below 8470 and Nifty declined 220 points same day, also declined below 8470 later.

Point to notice there:

Both events were exactly same but reaction of market was totally opposite in both the cases. At first RBI rate cut, Nifty bounced 600 points but in same event second time Nifty declined 800 points. There were two opposite reactions on same events. So, just analyze yourself, what you can conclude from big news / events etc if the same news is a cause of two different and opposite outcomes.

Conclusion is:

No matter what the news or important event is. Charts always speak truth. But yes, we might fail in identifying the pattern on charts as we are human and human can never be 100% correct. But, even if you fail to catch the right move, EWT will definitely save you from heavy losses. Elliott Wave Theory is always ahead of any news and Govt. policies but you need to identify it on charts.

And for RBI Policy meet on Tuesday, 07 April 2015 . I am not thinking about that, even I don’t know if there is some policy or not. My analysis will be based only on Elliott Wave Theory and nothing else.