Technicals | Jan 16 2013
14/1:
LAYMANS:
There aren’t too many of the larger cap stocks that can boast reaching all-time highs but that’s exactly what Commbank ((CBA)) achieved last Monday. Out of all the banks this company has continued to outperform with absolutely no reason why this trait can’t continue into the future. However, we mentioned last time that a significant zone of resistance was looming which portended to a reversal of form. Although the current pull-back has only been unfolding for a few days the ideal situation is to continue lower toward our target area as annotated. We have to remember that the trend since late August of last year has continued pretty much unabated with little in the way of corrections. There is nothing concerning about this whatsoever though at some juncture a pause for breath and slightly deeper corrective movement needs to unfold to keep the symmetry of the patterns intact. We’re certainly in a position to see a longer period of consolidation or possible deeper pull-back. Longer term there is still plenty of upside potential ahead and once those all-time highs are overcome the door opens for a continuation up toward $76.00 which is a move worthy of being involved with. For now though we have to be open to the possibility that price could roll-over a little further before the next buying opportunity arises.
TECHNICAL:
There was always a possibility price was going to tag all-time highs before reversing and as can be seen that’s exactly what’s unfolded. Also note that volume increased slightly during the recent reversal which always suggests the selling pressure is little more significant. In regard to our wave count nothing changes with the expected 5-wave movement up from the low of wave-(X) looking to have terminated last week. Remember, bigger picture we’re looking for a complex combination pattern to continue to evolve though this doesn’t detract from the upside potential that’s lays ahead. Right here and now though we’ve pencilled in wave-A as being in position meaning the perfect world scenario is to see a symmetrical (a) – (b) – (c) correction to the downside which should terminate in the typical 50.0% – 61.8% retracement zone which means price heading down toward $58.00 as a minimum. It’s not going to happen overnight and should take three or four weeks to complete as a minimum. As mentioned last time overlapping wave structures have been dominating over recent months meaning a corrective pattern higher is unfolding. We do have some confluence between $76.00 – $78.00 meaning it’s a longer term target to focus on. In fact the upper boundary of that target could be tagged and still remain in a corrective pattern which just emphasises the fact that choppy price action doesn’t necessarily mean the trend can’t continue. It certainly can as is evidenced by the chart here. We are obviously wrong in regard to a pull-back if the high of wave-A is overcome immediately though it isn’t our highest expectation.
Trading Strategy
14/1:
Our strategy last month was to await a symmetrical retracement once an interim top was put in position. Now that a high appears to have been made we just need to sit back and let the patterns run their course. Should a symmetrical corrective pattern terminate in the typical retracement zone then strength would be reason to initiate new positions. The target area remains as mentioned above circa $76.00 with a chance that slightly higher levels can be tagged before a more substantial correction takes hold. Aggressive nimble traders looking for short positions should wait until Wednesday’s low at $60.93 is breached before jumping on although just be cognizant to the fact that we aren’t looking for substantial falls here. In the current market environment I think the better option is to wait for the buying opportunity a little further down the track.
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