Technicals | Dec 05 2011
LAYMANS:
In terms of our wanted trajectory we couldn’t have asked for too much more from Seek with price rotating down to our target nicely. The rise off those lows is also a step in the right direction but needs to continue unabated for us to be confident that a strong and sustainable trend is about to unfold. There are likely to be a few sellers around the $7.00 region so it would come as no surprise to see a pause for breath at those slightly higher levels. As long as a powerful reversal doesn’t kick into gear from that zone then the bullish case remains intact. The larger degree patterns also look positive meaning if our shorter term expectations play out as anticipated the much larger move north we’re looking for is still on the cards. The one thing we don’t want to see is a swift reversal taking price beneath $5.64. It wouldn’t necessarily move us to a bearish stance but it would imply that the company isn’t quite ready to head higher in the immediate future. So one to watch over the coming days and weeks where hopefully price action can gain momentum and test those aforementioned levels sooner rather than later.
TECHNICAL:
Although the more textbook zigzag didn’t complete the retracement into wave-(ii) the 50.0% retracement level was all but tagged before the recent turnaround kicked in. Also notice the clear Type-A bearish divergence at the high of wave-b which also coincided with the clear rejection of higher prices. It’s something that rarely lets us down and although it doesn’t necessarily mean that weakness is going to unfold the prior pivot high is unlikely to be breached until the oscillator rotates back into the oversold position. Exactly what’s transpired here with the rally over the past few days commencing with our indicator already having unwound. In theory wave-(iii) should be underway which as always needs to be very strong and impulsive in nature. We also normally expect it to subdivide and extend which means it should travel at least 1.618x the length of wave-(i). This gives a target up around the $8.00 zone offering plenty of upside potential over the weeks and even months ahead. That said there’s no point getting too carried away at this stage and we are looking quite a way ahead. There is the small matter of the overhead resistance to contend with which will likely prove difficult to penetrate – at least at the first attempt. A break beneath the low of wave-(ii) would be far from ideal though it wouldn’t invalidate our count. However, it’s important that the typical retracement zone isn’t breached as it would put serious stress over our labelling and be reason to be highly dubious in regard to our bullish interpretation.
Trading Strategy
2/12:
From a trading perspective it’s unfortunate that price didn’t quite reach the typical retracement zone. In fact it came within just $0.04 of doing just that. Aggressive traders could buy following a penetration above today’s high which looking at our longer term objectives would provide a nice risk/reward trade if our labelling is correct. However, we need to be cognizant of the overhead resistance which could potentially be a stumbling block. Clear rejection of those higher levels accompanied by increasing volume would be reason to tighten the trailing stop and defend open positions. Longer term investors could accumulate partial positions in this general region and look to top up following a comprehensive break up through the resistance zone. There remains plenty of upside potential for SEK although there is not too much room for meandering from here.
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