Technicals | Mar 24 2011
LAYMANS:
We left the AUD in early March as its was coiling in a triangular shape. This is a very bullish proposition ONLY if it breaks to the upside. It did not. Prices probed lower which suggests the immediate longer term bullish rally is now going to be delayed for a little longer and in the near term we'd expect some more consolidation to take place. This consolidation might see prices move a little higher, or ideally move a little higher, but they should not continue to travel higher at this stage. If we can see this consolidation rotate between $0.95 and $1.05 for a few months we will then have a very strong foundation to streak higher. No doubt in my mind that the AUD is posturing in very a bullish manner, although ideally it may take a little extra time now to get a move on. Patience will be rewarded although the risks to the analysis is that it goes higher sooner rather than later.
TECHNICAL:
Triangles must continue to coil, that is wave-e must remain higher than the prior wave-c. In this case we saw price probe below that wave-c invalidating the triangle and placing the ongoing impulse pattern in doubt. The reason is symmetry. Wave-4 was becoming too long in comparison to the prior wave-2. The ideal count now suggests wave-4 terminated on December 1st and wave-5 was stunted and terminated on December 31st. Such a count enables much better symmetry for the full 5-wave count off the mid-2010 lows. As such we're now seeing a larger corrective pattern that also appears to be taking on a more flatter stance than what would normally be expected at this juncture. This is acceptable and if it does unfold as such then it will also be extremely bullish, indeed substantially more bullish than what has been discussed in these pages before. But again to retain that ongoing symmetry we'd like to see this wave-(2) or -(B) take some time meaning further consolidation. The risks we face is that price will jump immediately higher leaving us behind. That's okay. We will get the opportunity to hop aboard with another pattern, but with the information we currently have, that is a total lack of price and time symmetry, we would expect a longer consolidation to be the higher probability pattern.
TRADING STRATEGY: I'll be straight forward with the risks here – we may miss the ride higher. Prices may break higher and leave us behind. From a pure Elliott perspective and from experience, we can only be confident of taking a position when our patterns are fully complete. If they're not complete, the chances are that they will need more work to complete and therefore entering a position ahead of time means an increased risk of entering prematurely. In this case we really need a lot more time and price action to take place. It may take another month or two before the ideal pattern takes shape but if it does we can expect a very strong rise, possibly toward $1.15 to $1.18 to unfold.
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