AJX: An Elliott Wave Analysis

I don’t remember anyone on the forum yet refer to AJX price movements in relation to Elliott Wave Theory, which is in common use within the professional TA community. So I thought I might offer my interpretation for discussion here. It fits well with ARMCH’s insightful analyses and sensible reading of the background sentiment that has determined AJX historical price patterns over the last few years.

Long-term charts are less vulnerable to manipulation or fleeting irrational investor decisions that can distort the analysis of shorter-term price patterns. They therefore are much more likely to reflect fundamental shifts in shareholder sentiment that occur as a company moves through different phases in its business. Hence they also are more likely to allow a valid TA interpretation.



[Some explanatory references for general theory and complex corrective waves.]

In my opinion, Alexium’s 5-year price history can best be interpreted currently as nearing completion of the first corrective phase of its primary growth cycle. The 1-2-3-4-5-A-B-C price swing structure shown on the chart, with a 61.8% correction (5-to-C), is a classic Elliott wave 5-3 cycle. Since completion of wave C in August 2016 the correction has extended in complex form as a contracting triangle, which normally is the final stage of a correction before the overall trend resumes (i.e. it is a continuation pattern).



Changing sentiment throughout the cycle is believed to create the various individual waves in the overall Elliott wave structure, with these changes reflecting the different types of investors participating in those waves, as represented in the graphic below.



This shows retail investors as commonly buying in the waves either side of the peak, and being the last to then finally bail out as corrective wave C completes. The complex triangular correction existing in the pattern for AJX from August 2016 would be a continuation of retail selling in an extension of the correction. I think much of the discussion that has been posted on the AJX forum over several months can be related to this graphic.

The next phase in the primary cycle structure would be establishment of motive wave (3), which is normally the longest in the cycle, and is commonly referred to as the ‘institutional wave’. It is important to realise that this possibility only would be validated by price breaking out strongly through the upper limit of the corrective triangle.

The AJX chart looks to be close to an inflection point.

IMO

T7