chart update, page-2

In my previous post, I was trying to pick the end of Wave 2 (down) and whilst it didn’t play out that way it was no big deal because the trade strategy outlined would not have triggered an entry.

I highly recommend opening this post if full width view to see the chart properly.

Since then prices have declined, so I’ve taken fresh view in an effort to see where the probabilities might lay now.
The chart this time is a weekly chart, I’m looking for bigger picture stuff. Sometimes it’s better to stand back from the trees to see the forest.
What I’m honing in on is time, price and pattern correlations.

Time
Wave 1 (8th Dec 2009 to 30th Mar 2012)
Often Wave 2 retracements end within a time band of 38.2% and 61.8% of Wave 1
We are in that time band right now!! See chart blue bits.

I’ve also indicated another possible time retracement zone, see chart red bits. This red zone is based on time projections of wave (a). I’ve based my red zone on two factors, firstly 61.8% time of wave (a) projected from (b) and secondly 100% time projection of wave (a) projected from (b). It happens a lot in Elliot Wave theory that wave (c) = wave (a) price-wise and it is also very relevant time-wise.

Last week we nailed 100% time projection of wave (a) and it also fell within the blue zone, high probability zone. The maximum red time projection is 161.8%, so there is still room for the red time zone to expand, but it is certainly at an interesting juncture.

Price
Wave 2 down has already exceeded a 61.8% price retracement, so minimum conditions have been met and we should be on alert for signs that Wave 3 upwards is about to start.

Pattern
The red abc pattern of Wave 2 currently sits at an equal low for both wave a and wave c. It’s not a regular zig-zag but corrective patterns come in many shapes and sizes. The internals of wave c have nailed a 1.68 retracement of (a) to (b) projected from (b). I think there is enough to go with, but it’s not picture perfect

Summary
Time and price conditions suggest a possible upward reversal may commence soon. The pattern is a not real convincing but nonetheless has quite a bit going for it.

Possible strategy, (not a recommendation)
Buy if we get a close of 13.5c, with a stop loss @ 10.5c.
Trade risk = 3c with appropriate position sizing to be applied.
Take half off the table at around 17c and let the rest run. If it prices rises rise above red (b) then it is a reasonable probability that prices will continue to rise and ultimately take out 30th March 2012 high of 24.5c.

Note: I am not trading POH, I've already got heaps based on fundamentals. The chart and my analysis is informational only and should not be relied on as trading advise.