Technicals | Jan 30 2013
Bottom Line 29/01/13
EW Trend: Impulsive
Price Trend: Up
Trend Strength: Strong
Technical Discussion
LAYMANS:
Some stocks have been trending very nicely of late with CSL ((CSL)) definitely being one of them. In fact since September 2011 this company has added over 110.0% in value which is no mean feat for a heavyweight. And as we’ve been mentioning in recent reviews there is no reason to expect anything other than further strength over the months ahead. The odd pull-back is inevitable though the broader trend remains firmly intact with no reason why our medium term target circa $65.00 can’t be achieved over the coming months. And that’s the least we’d expect with scope for even higher levels to be attained over the longer time frame. There’s no doubting the fact that the trend is looking a little overstretched though that in itself doesn’t portend to a significant retracement. Buyers are more than willing to chase price higher and whilst this trait continues the bullish outlook remains firmly intact. It would take a probe beneath $50.00 to start thinking in terms of an interim top being in position though there is no evidence suggesting those levels are going to be tested any time soon. The best strategy here is to continue to align ourselves with the trend until there is evidence that a top is imminent.
TECHNICAL:
We were focusing on a micro triangle during our last review with the expectation that price would resolve itself to the upside. These types of patterns statistically break in the direction of the prior trend though in this instance the exact opposite occurred. However, very importantly the leg lower was short-lived with buyers once again stepping up to the plate early. And this has been the case all the way up from the lows made just over a year ago. That is any small dips or consolidation patterns have been sought after aggressively by traders and investors alike. In regard to our wave count nothing changes with wave-(v) continuing to subdivide very nicely indeed. Should recent strength continue then smaller degree wave-iii should be in position over the coming weeks which should be followed by another consolidation pattern which again can only be viewed in a bullish light. Remember, the wave equality projection of the much larger pattern sits up at $65.00 as already mentioned with the potential for a larger impulsive movement to develop should that target be overcome. However, that’s something for much further down the track and as always much will depend on how the smaller patterns evolve. At the moment they are continuing to subdivide very nicely which always provides clarity from an Elliott perspective. The other pattern of interest here is the rising channel with the recent retracement more or less tagging the lower boundary which is something that’s transpired on several occasions from the low of wave-(iv). The channelling technique wasn’t actually discovered by Elliott himself though he certainly improved on it. In relation to the charts here we’ll be looking for wave-(v) to terminate at the upper boundary of the channel a little further down the track.
Trading Strategy
Despite the strength of the trend there is no point jumping on just for the sake of it with a low risk entry required before getting involved. Today’s gap higher may well need to be filled which in itself would provide a low risk entry. Should yesterday’s high be tagged and rejected positions could be initiated immediately with a view to trading price up toward our aforementioned target circa $65.00. On the flip side, if the upper boundary of the rising channel is tested immediately, then rejected we need to be on alert for a retracement back down toward the lower boundary of the pattern. This would present another buying opportunity although it’s going to take two or three weeks for the smaller degree patterns to run their course. The small micro pattern we were looking at during the last review failed to break out in the required direction though this doesn’t mean we have to move away from the strategy. Consolidation patterns within strong trends are always reason to look for opportunities.
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