This chart has been fairly predictable for the past year, however as we start to shape up the larger degree wave count, I've decided to alter this from an expanding diagonal to a typical impulse. The main thing shaping this is the action for wave 2 which appears to be a flat.
Under this premise, we have subdivision of wave 3 underway. It appears to be an expanded third: triggering the 1.618 with evidence of another leg up to the 2.272 at $56. This is the primary trade at hand, as we target 15-20% gains here. This trade presents a 10:1 RR with a SL around $45.50 at the recent low for a 20% target.
Wave 4 of 3 looks to be complete, hitting the 1.618 extension of A to B (see chart below). We have RSI testing the 70 which will be telling: if it can get into overbought territory, then it's indication of a trend reversal (as markets typically only go into overbought when bullish). Not pictured is the stacking bullish divergence for this wave 4. Another thing that stands out as evidence of wave 4 complete is that it was sharper than wave 2 of 3. By rule of alternation, we would expect this.
Upon hitting this target near $56, we will reevaluate, likely close, and look for the next wave down. For now, I have a $45 level identified (w4 larger count) and a 2.618 target near $60 (w5 larger count) on the map. Remember: for extended wave 3s that approach the 2.0, we look for the next fib level near 2.618 for w5. These future targets are dependent on what happens here in this wave 3.
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Few things to be cognizant of: 1. we did get bullish on the 15m RSI which is great to see 2. inverse Head and Shoulders patterns are very common for reversals. With the recent reaction, we can define the resistance and support that shape this pattern. It also aligns with a gap underneath at -1.5%. If you're looking to add or enter, this may be a good spot. Regardless, it's important to recognize these patterns so you don't get faked out by a sharp move down. It's common to see deep wave 2 retracements after a trend reversal, as psychologically it fakes people out, and technically measures out for a larger impulse to come.
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We have a great buy target lined-up.
Below you can find the log chart showing a confluence of support.
There may be one last pull down to 43.10ish, but don't get too greedy now. Anything from here on down is a buy!
Targets will be outlined in a future post, so we dont clog this thread down too much.
I was pretty happy with it around 45.69, but I didn't know if it would be a fake out or not, I wanna see if it passes 46.99
warrenbudget
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@johnston151, $47 would absolutely be an important level to watch. On my latest update, I defined a potential path for doing this.
johnston151
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@warrenbudget, Do you ever check option chains as well for an idea too? Someone pointed it out to me a while ago to check for potential over sold "OTM" set ups. You have a ton more info than I use, I followed along to speculate, cus I am curious. I'm pretty green to be honest. ( new. )
johnston151
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@warrenbudget, So for example todays spread on calls, via ameritrade opt chains is.. 16,379 vol, int 17,625
46.50 6,909 vol, 6,473 op int. For calls. 3,788 on 46.5 put. 1,88 vol on 46 put but 2,785
Puts is.. Idk, it could be a silly idea. Just wanted to run it by you as well.
warrenbudget
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@johnston151, I don't usually trade options since naked positions exceed my boundaries for risk, and I dont really want to hold anything long term so covered plays are out of the picture. I will keep an eye on IV and buy long naked calls when low (i use marketchameleon for those stats). For example, rn the IV is dropping on PFE, so could be better to pick up calls if this stock pulls back another 1% or so. I dont use the strategies you mentioned, but it sounds like order book scanning which is a proven strat if automated.
johnston151
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@warrenbudget, I see, I appreciate your counter opinion and reason behind it, I do agree they IV is just being crushed and being kept stagnant. I think the Long term is gunna be around late September, towards their earning calls in September. I feel like it should've retracted to 45-40, and run back up to 50+ later this year, but they seem to have a lot of mid way news. But I'm just sitting on my hands and waiting. I'll stick around to see your ideas!