Chart, page-201

7.5(6) has been a critical level for a long time. Throughout the entire LYC decline 7.5 was a realistic target from the structure that drove LYC down, I think I started mentioning it when LYC was around 50 cents. It was also a target from a separate structure on the lows which generated an upside target to 7.5(6). Once that target was hit the level remained important mostly from the long term structure, the level will always remain important, but there is no structure valid at the moment to suggest it is a target.

Often when structures reverse they will back test their previous long term fib level, which from the 7.5 level the next level up is to 23 cents, which I think I may have mentioned is one of my targets for LYC. However for the impulse structure to remain strong then ideally any retrace would not exceed the 61.8 level once equality is reached. The period from July to October makes for the base of the current impulse structure, the 200 of that is wave equality which takes it up to 13.2. Once that level is hit the short term structure runs the risk of completing and setting up an opposing structure that may bring LYC back down and slow things. So any retrace can't be large and it can't run the risk of forming say a double top for example.

As an example if you look at MMS for the period Feb to July 2016. Off the lows you have a bullish structure, however it runs too fast which results in an opposing bearish structure - these two then have to battle things out, forcing volatility and generally making a mess. In that case the bearish structure won. Now while the base to LYC is different to MMS and is simply stronger, the way the impulse moves, and volume are behaving are quite similar. My comment the other day to someone who suggested the volume currently on Lynas was good, if you have a look at the MMS chart and look at the volume in May 2016, it was that volume that ultimately gave the bears strength. The volume is a warning sign, it is not something to be confident in.

Cheers