Technicals | Feb 17 2012
LAYMANS:
There was some light appearing at the end of the tunnel for ((WPL)) during our last review but although slightly higher levels have been seen a little more work needs to be done before getting too carried away in regard to upside potential. There are also couple of technical headwinds to overcome though we’ll discuss those in detail below. On the positive side of things the bounce that kicked into gear in December last year has been strong which is definitely a step in the right direction. The next hurdle likely to sits just beneath the $40.00 mark which will hold a few sellers.
The actual target sits slightly above those levels and it will be important and very interesting to see what reaction occurs when/if that region is approached. If it can be overcome then the door opens for a continuation up toward of the April 2011 high circa $50.00. It’s going to take many months to get anywhere near those heights with much also depending on how any rise unfolds. If the strong price action over the past couple of months or so continues unabated it can only bode well in regard to the bigger picture. Failure immediately wouldn’t be a particularly bearish proposition but it would likely mean much more of a base is going to need to be built before the stock is ready to head higher in a more significant manner.
TECHNICAL:
The impulsive nature of the rise from the low of wave-(ii) or-(b) is exactly what should be unfolding at this stage of the trend if our count is correct. The more bullish scenario in suggesting a 5-leg move is going to unfold from the lows made in September of last year is still a possibility. That said, the depth of the retracement into the December low is raising a red flag in regard to the more bullish scenario. Whenever the typical retracement zone is penetrated (as in this instance) the patterns become much weaker even though they technically remain in place. Basically it means a little caution is required. Whichever path is taken strength should be the way forward over the medium term with the line of resistance showing reasonable confluence with the 50.0% – 61.8% retracement level. This is the least we’d expect of a counter trend move. If a much larger flat pattern is unfolding then the highs of wave-(X) have a chance of being tagged over the longer time frame. The only slight concern here is that Type-A bearish divergence is in position on the daily time frame which is something that always catches our eye. Price has made a higher high yet our oscillator has made a lower high. It’s worth stressing that the pattern hasn’t triggered as yet though an immediate downturn would do just that. It doesn’t automatically mean that a retracement is going to unfold but as a general rule of thumb it means the prior pivot high will not be overcome until the indicator rotates back down into the oversold position. Something to keep a close eye on over the coming days.
Trading Strategy
14/2:
If equity markets were looking weaker there would be scope for looking for a shorting opportunity here, especially if the bearish divergence triggers over the next day or two. That said, a decent trend higher has been developing over recent weeks with plenty of support coming in around the $30.00 region. As such I wouldn’t be tempted to sell with downside being very limited indeed. Nor is there a great reason to be looking for a buying opportunity right here and now though that could change over the coming week or so. If you’re interested in a swing trade be on the lookout for our oscillator rotating back down to the oversold position as price drifts sideways with a bias to the downside. Some short term consolidation here would still be acceptable and possibly present a low risk entry a little further down the track if strength returns. Just be cognizant to the line of resistance and the typical retracement zone as with the information at hand it’s probably an area that’s going to prove difficult to penetrate.
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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.
