Daily update:
Ranges
Note we are expecting a reversal down, so these ranges are hypothetical on the basis that it keeps trending up.
GXY: 369 - 398
ORE: 629 - 672
GXY:
ORE Continued to break out (downwards) from its declining wedge forming a new channel with a lower bound on Thursday. Shown by the 2 blue lines on the ORE chart. The upper and lower bound of the channel are now diverging which I treat as a strong indicator of increased volatility and impending direction change. There is now a significant difference in the GXY and ORE predicted and actual prices of each share and they must trend towards each other today. Whether that happens by ORE rising, GXY falling or both is obviously an open question, but if we expect that we have essentially completed the Bc wave then we would expect both to trend downwards either today (Friday) or Monday.
GXY surprised with a 14m+ after market auction which took the price from 376 to 388. 376 would have placed GXY and ORE in agreement and been consistent with our expectations. While representing a significant divergence, 388 did not break GXY from the rising channel nor breach the range of possible prices for the peak of the Bc wave, just not what we considered to be the most likely price range of 373 to 383. It is feasible for the GXY price to reach 399 and stay within the range of possible prices before we say the EW model is not holding. I do not consider that we are likely to reach that price however. I am expecting GXY to rapidly lose ground today as it trends towards ORE, while ORE may trend up a little to meet GXY before both resume commence their descent. There should be a bounce and then a small climb back to something close to the Bc wave high in a few days, but the aftermarket auction has significantly confused what this price might be. We might have guessed around 370 before that auction but now it is going to be a lot harder to determine.
On the assumption that the rising trend continues, we note that the 10 day charts have delivered flags on both ORE and GXY which prima-facie imply a lift of 10c on the GXY chart to 388, which funnily enough is where the after market auction reached. The next thing would be a flag being formed which would see a slight price decline and then a new pole, but we would then be on the sixth pole of the sequence so it should be half of the previous pole and then switch to a inverse flag which might then lead into the pole sequence continuing. So a price decline initially does not automatically mean that the lifting sequence has finished, which will make the trading tricky for the first half hour until whether we have a flag or an inverse flag forming becomes clear. The 10 charts also show that ORE remains inside its rising channel at this point, while GXY has broken through the top of its rising wedge. Again the after-market auction has confused the signals. When the SP moves against the expected direction of a pattern like a wedge you look to see if it holds above or below before determining the pattern has failed. In the event of a false break it is usually a signal that a break in the correct direction is imminent. That would have been the case with the GXY break as the flag returned it to the wedge, but the auction cleared it again so we are left with the sugestion that the break up is legitimate and not false.
Other factors to consider include the strong overnight performance of Li stocks in the US which auger for a rising SP today.
Note I have analysed this all from a strictly "objective" view. You all know by now, that I expect the price to retrace, however the short term patterns are suggesting a rise, but all as a consequence of the after-market auction, which if it is not followed up by strong buying this morning, or seller capitulation will be a false signal. ORE is delivering no such confusing signal and is adhering essentially to the EW script as we mapped it in previous posts. I would treat a downwards failure of the ranges above as an indicator that the EW script is likely correct, and a continuation of the trends as simply postponement of the retrace for now.
ORE:
10 day:
