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Elliot Wave Analysis for KOSPI
Kospi Composite Index is the stock market index of South Korea based in Seoul consisting of over 920 largest listed companies, based on their market capitalization. It was introduced in 1983, belonging to the Korea Stock Exchange with its headquarters in Busan, and started from the 100 points.
The top categories of the industries contained within the index are electronics represented by Samsung, automotive manufacturing represented by Hyundai Motors and Kia Motors, biopharmaceutical represented by Celltrion, and chemicals represented by LG Chem Ltd.
The KOSPI Composite Index is traded at 2440,93 points, almost near its all-time high at 3316,08 in January 2022, and an all-time low at 93,14 points in January 1981.
Monthly Range: Higher in wave ((3))
On the monthly trading chart (log scale), our measurement has reached the Primary degree waves, and more specifically the index has been completed the ((1)) Primary wave with a nice impulse, at the time of the Pandemic in 2020 has finished the (2) Primary wave, it rallied to a new all-time high in January 2022 as a part of the ((3)) Primary wave and now shows a small drop.
The crisis of Covid-19 brought the index to the level of 1439,43 points which is considered an important support level for any decline up to that. With the basic scenario being uptrend, it is expected after the end of the correction to move higher constructing the rest sub-waves of the ((3)) Primary.
Weekly Range: Completing wave (2)
As we mentioned above, on the weekly trading chart (log scale) we observe that the corrective (2) Intermediate of the ((3)) Primary wave has already touched the 38,2% Fibonacci retracement level at 2410,88 points having made a low at 2396,48 points. At a first sight from this chart, we can count 5 waves down, and this regarding the Elliot Wave Theory,
is a downward impulse, so the correction for sure still hasn’t been completed. The only option is to be formed a zig-zag pattern (5-3-5) and to predict the end of this decline we have to measure the next Fibonacci retracement levels.
The 50% and the 61,8% levels are at 2184,78 and 1979,89 points respectively. We expect a bear market rally for constructing the second leg – B Minor wave – of this hypothetical A – B – C Minor degree waves, and then the last third leg as of the downward C Minor wave to finish the correction.
Daily Range: Completing wave (2)
Looking at the daily trading chart (log scale), we see much closer the unfolding of the sub-waves of (2) Intermediate wave. We believe that the sharp waves down maybe are part of a leading diagonal which is fully acceptable for A waves like 1 waves, according to the Elliot Wave Principle.
Till now Kospi doesn’t make any break at the opposite side to have a clearer opinion of what will be going to happen next. That’s why our estimation to be at the A Minor of the (2) Intermediate wave is the only logical explanation of this diagram. On the other hand, it is not canceled the idea of a double corrective pattern and especially an aggressive double zig-zag pattern as of a W – X – Y formation again of Minor degree waves.
Our counting focused from the beginning with a leading expanding diagonal for the first 5 consecutive waves being the ((a)) Minute wave, thereinafter a running flat for the ((b)) Minute wave, and the last sharp dropdown as of the ((c)) Minute wave. There is the end for the W Minor wave. After that, we can see a sideways contracting triangle for the X Minor wave and again a sharp fall into the 38,2% Fibonacci level.
Surely someone can see other alternative patterns, which also will be accepted if they follow the Elliot Wave Theory rules. We suggest that we must not enter into the market until we see a pullback rally up to the resistance levels of a previous Minute degree waves of the A or W Minor wave, or it’s preferable to lose the trade if it goes deeper to the next retracement levels so that there we can count better the waves to be sure for the ending point.
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