Technicals | May 26 2011
LAYMANS:
'Price is now tagging our target zone on this immediate run higher, so we need to stay alert that some form of breather is going to be required sooner rather than later here.' Well we have certainly been granted the breather we were looking for and it is now just a matter of whether the rules of Elliott Wave Theory can hold strong throughout this immediate corrective stage. We will discuss this in more detail in our technical area yet it basically means that 1450 needs to not be broken into before another run higher takes centre stage. The dip that has taken place in recent trading has been a little deep for my liking based on where we are positioning the immediate trend. Yet that said, while the core rulings remain unbroken, we will continue to align our thinking in favour of the Bulls across all time frames.
TECHNICAL:
The patterns we are seeing here now are corrective in nature. And as per our labelling, price is either working its way though a wave-iv or (iv), with the outside chance being that the higher degree Wave-4 is still taking shape here within yet another running flat type pattern. Alternate counts aside, if this is a wave-iv we are presently watching unfold here, then the wave-i highs cannot be broken into as part of a core Elliott Wave ruling. The wave-i and (i) highs both sit around the 1450 levels and the recent pullback has stretched just over 50% of the length of wave-(iii) and a little more in relation to the more minor wave-iii. This is about the maximum we would like to see a wave-iv retrace to. So really now we would like to see some coiling of price to start taking shape above the recent dip lower at 1462. And a bullish pattern with an element of symmetry start to develop over the coming weeks. Any dip below 1450 and we will initially be reverting to our alternate count be it we would need to also remain on alert that something more sinister may be developing here within the realms of a major top being in place at the early May highs. We continue to call for higher prices in Gold longer term so this will certainly be put to the test if price levels start to push lower in impulsive fashion over the coming weeks. We will come to that bridge if and when such a scenario starts to unfold. For now, we stay attuned to the patterns at hand . And that aligns further consolidation shorter term, before another push higher starts to dominate yet again. Our Divergence indicator remains well over sold here so scope for prices to be supported above the critical 1450 level still remains shorter term. We will certainly be on a less solid footing from a bullish perspective if they don't!
TRADING STRATEGY:
If the immediate pattern can continue to take shape and coil around with symmetry developing over the coming weeks, then another bullish trading opportunity will be sought. Stand aside if 1450 is broken down from shorter term. Any such break will require the chart to be reassessed with our alternate count a likely candidate to be considered via a larger Wave-4 running flat still requiring more time to unfold. If the former scenario continues to unfold though, our 1600 targets will be easily achieved shorter term. A little more patience required here to confirm the analysis before just jumping back on board.
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