Technicals | Dec 18 2013
16/12:
I’m not quite sure what was the reason behind the massive drop last Monday was although there were several announcements made that day. One of them obviously wasn’t well received by the market as price gapped down from where further weakness has followed. That said, we’ve been noting the choppy price action on the way up that commenced back in August as being a bearish proposition over the medium term with another leg south required to complete the larger corrective pattern. So in that respect the recent reversal is nothing out of the ordinary although obviously we weren’t expecting the large gap down last week. In fact last Monday’s bar has resulted in some bullish divergence being in position though importantly it hasn’t yet triggered. If it does trigger we’d expect to see a small bounce or even a sideways consolidation pattern before one final dip take price to the line of support. The typical retracement zone as annotated could be tagged though it would be a much more bullish proposition should the current leg south terminate above support rather than beneath it. Technically there is some bearish divergence evident on the weekly chart (not shown) though it isn’t a textbook example. And with the indicator well on its way into the oversold position it’s not overly relevant though can’t be simply ignored.
We often talk about very large triangles being reversal patterns and that’s exactly what’s transpired here with Brambles. In fact this one commenced way back in 2009 and took over 3 ½ years to conclude which is an awfully long time to say the least. However, once the upper boundary of the pattern was penetrated price hasn’t looked back with strong impulsive price action being the way forward. Since May the stock has been taking a well-earned pause for breath though early next year could see the resumption of the strong prior trend. Zooming into the more recent price action shows we should be in the latter stages of a 5-wave movement down from wave-(b) which once complete should also lock in larger degree wave-B. And this is exactly what we’ll be looking for a little further down the track as demand returning around the line of support would be reason to sit up and take notice in regard to a trade. For now though, we just need to let the smaller degree patterns run their course though the recent pivot low should only be penetrated by a small margin during further weakness.
Trading Strategy
16/12:
The bullish divergence triggering around the line of support is about as bullish as it gets although it doesn’t really fit from an Elliott perspective meaning a little caution is required. And let’s not forget the bearish divergence on the weekly chart which is also providing a headwind. All things being considered I think we need to stand aside here and let wave-(c) do what it needs to do which basically means hitting slightly lower levels, albeit possibly following a sideways consolidation or small bounce. Definitely on the watch list as the patterns look bullish but patience required for the time being.
Re-published with permission of the publisher. www.thechartist.com.au All copyright remains with the publisher. The above views expressed are not by association FNArena's (see our disclaimer).
Risk Disclosure Statement
THE RISK OF LOSS IN TRADING SECURITIES AND LEVERAGED INSTRUMENTS I.E. DERIVATIVES, SUCH AS FUTURES, OPTIONS AND CONTRACTS FOR DIFFERENCE CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER YOUR OBJECTIVES, FINANCIAL SITUATION, NEEDS AND ANY OTHER RELEVANT PERSONAL CIRCUMSTANCES TO DETERMINE WHETHER SUCH TRADING IS SUITABLE FOR YOU. THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN FUTURES, OPTIONS AND CONTRACTS FOR DIFFERENCE TRADING CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL OF THE RISKS AND OTHER SIGNIFICANT ASPECTS OF SECURITIES AND DERIVATIVES MARKETS. THEREFORE, YOU SHOULD CONSULT YOUR FINANCIAL ADVISOR OR ACCOUNTANT TO DETERMINE WHETHER TRADING IN SECURITES AND DERIVATIVES PRODUCTS IS APPROPRIATE FOR YOU IN LIGHT OF YOUR FINANCIAL CIRCUMSTANCES.
Technical limitations If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.
Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.
