Santos Nearing Buying Support

This story features SANTOS LIMITED. For more info SHARE ANALYSIS: STO

Bottom Line 27/03/14

Daily Trend: Down
Weekly Trend: Down
Monthly Trend: Flat

Technical Discussion

The expectation for Santos ((STO)) following our last review was to see further weakness with the target area as shown ideally being the next port of call.  And although a brief show of resilience has been seen sellers have once again gained the upper hand taking price to within a whisker of the typical retracement zone.  We now need to be on alert for buying demand returning although in a perfect world we’ll see one final dip over the coming days to fulfil our pattern requirements.  Signs of accumulation just beneath $13.00 would be a big step in the right direction whilst also giving us every reason to look for a low risk set-up although we’ll discuss that in more detail below.  It would now take a comprehensive break up through pivot high made in December of last year at $14.75 to suggest our calls for one final sell-off are going to be ignored.  Anything’s possible though I think the risk over the short term is to the downside.  One thing to mention though is that the lower boundary of the target must not be penetrated or the patterns will deviate from textbook from where we’ll have to move back to a neutral stance.

Those that have an understanding of the Wave Principle will note that the price action from the high of intermediate degree wave-B is choppy and messy in nature which isn’t indicative of wave-C.  And that’s exactly what should be unfolding.  Yes, we could label the correction down from wave-(A) as a combination pattern – likely a double zigzag though at the end of the day nothing changes.  So we can be as pedantic as we like in regard to the labelling but whichever way you look at it the typical retracement zone remains the target.  The only reason for mentioning the alternate combination pattern is that it shows how easy it is to get paralysis of analysis.  Our job isn’t to label every twist and turn on the chart as often it simply serves no purpose with our efforts better utilised elsewhere.  Anyway, back to the chart here shows that wave-c should be drawing to a conclusion very shortly which in turn should complete a much larger degree wave-(B).  We’ll then be looking for a similar leg to that seen between June and October of last year which is definitely a move worthy of being involved with.

Trading Strategy

If we can get one final probe down into the typical retracement zone there is a good chance we’ll be putting forward a formal recommendation though that time isn’t quite yet.  An A-B-C correction means that we can use our SaR indicator as a trigger point which currently sits at $13.83.  So buy following a close above the indicator whilst placing the initial stop one tick beneath the prior pivot low which of course is yet to be determined – unless price kicks higher with a degree of attitude right here and now.  We may use a slightly different entry technique depending on how the patterns unfold though any trade will be put forward in the Position Status Page as usual.  One for the top of the watch list, especially if you want to be involved in the sector.

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