Based on our wave analysis, the consolidation in KGB for the past 4 months might be an attempt to form a contracting triangle to complete wave iv correction. Diminished volume
and decreasing volatility
during the pattern formation following wave iii rally might further support this wave count. Triangles are unique in Elliot's wave principle in the sense that it always occur in a position prior to the final actionary wave in the pattern of one larger degree. In this case, the contracting triangle as a 4th wave appears prior to the formation of the 5th wave which is the final wave that completes the 5 waves pattern of an impulsive move. This unique feature makes triangle patterns very tradable and provides a high confidence trading setup from both Elliot's wave and traditional TA perspective. At the moment, we would stand aside and wait for the evidence of wave (d) and (e) formation before considering a long position. Also, take note that sometimes wave Es tend to undershoot the AC
line of the triangle before going up again in an uptrend market so getting in early before the pattern completes might not be ideal. Given our wave count is correct, in our view the medium term outlook of KGB remains bullish
. However, we would be more cautious on a longer term timeframe since the uptrend might be near its peak as evidenced by the near completion of 5 waves impulsive pattern of a minor degree since its inception.