LOCKIT Application Example Part 2

The indicators on the weekly chart

Let’s see if our indicators are confirming the end of wave 4 on the weekly chart.
To get this confirmation we use 3 indicators:
The SVAPO oscillator with standard settings.
The RSI indicator with a 14 weeks SVE_RSI_StDev, and deviations at 1.5 over a period of 100 days.
The Bollinger %b oscillator SVE_BB%b_HA, over a period of 18 weeks with reference levels at 10 and 90.

 

Figure 2.5: CMS weekly indicators.

Note how in figure 2.5 SVAPO is turning from below the lower standard deviation, the oversold area and is making a divergence with price, lower bottoms in price with higher bottoms in SVAPO.
The RSI is turning up from below, close to the 30-level.
The Bollinger %b oscillator turns up from below the 10-level and diverges with price.
So, it seems that also the indicators are showing the start of a medium term up move.

Daily chart

In the daily chart we can analyze in more detail the development of wave 4 up to now. In a correction wave, waves A and C are basically impulse waves and wave B is a correction wave.

Figure 2.6: CMS daily chart, detail of wave 4.

Special offer: "Capturing Profit with technical Analysis"

An impulse wave of the same order generally moves within the same trend channel. Figure 2.6 shows us that this is clearly the case. Looking at the wave count it seems that we are having now sub wave 4 within wave C. In other words we are still expecting impulse wave 5 down, which should bring the price below $12.55.

Search the Internet

Wave C is not only moving within the same channel, but also within the upper side of a downward pitchfork with exact the same slope. We expect the up move of wave 4 to find resistance at the upper side of this pitchfork, against the 50-days simple moving average and close to a resistance at $14.0. This seems to be a good scenario to end wave 4 and to start wave 5 down.

The weekly chart shows a possible start of a medium term up move. But, buying now would not give a good risk/reward ratio. If however we are wrong about not buying now, we can still buy when price breaks the resistance just mentioned. We will follow-up the further price evolution on the daily chart. We expect a short term up move, followed by a continuation of the downtrend to make a new low.

LOCKIT Stock Trading Example Next -Previous -Part 1 -Part 2 -Part 3 -Part 4

STOCATA Stocks Technical Analysis HOME