BOTTOM LINE
6/7:
EW Trend: Corrective
Price Trend: Up
Trend Strength: Strong
Broker Consensus: Intermediate BUY
6/6:
EW Trend: Corrective
Price Trend: Down
Trend Strength: Strong
Broker Consensus: Intermediate BUY
LAYMANS ANALYSIS
6/7:
VIDEO ANALYSIS (3 mins 52 secs)
Long video. Expect extended download time
We reviewed SMY exactly 1-month ago and suggested that a move toward $5.00 was then probable. Yesterdays highs was $4.87 and showed some minor supply entering the market. This area respresents minor price resistance as well and could be a level whereby prices start to fail. The larger picture is assuredly bullish but the pattern indications, both short term and long term, suggest that significant gains are not going to made any time soon. We may see short term strength continue from here if this supply abates but speaking in the context of the next few months I'd suggest SMY will be hard pressed to make new highs. That said, with the quite obvious, and strong, buyer demand back in early June it's also highly probable that significant weakness will not be forthcoming either. My analysis suggests that a broad sideways range will develop over the next few months before we start moving higher again in the multi year uptrend. Bullish, but don't be in too much of a hurry to jump on board.
6/6:
Prices have been trending lower of late and whilst I do expect a bounce in the near term I am not confident that the bounce will be sustained. This chart is the daily chart. Our last review discussed an extended sideways period from a weekly perspective and I believe that scenario to still be unfolding for a few months yet. SMY is a nickel stock but appears to have just got ahead of itself from a fundamental perspective. The longer term trend remains upward but we need a lot more sideways movement, possibly till near end of 2007, until prices are ready to start higher again. In the interim I am expecting an advance back toward the $5.00 area before weakness sets in again. If you are holding the stock as a trading position then you may wish to review volume characteristics at that level to determine continued strength or resumption of weakness - which I favour. Longer term holders simply require patience, although further weakness cannot be overlooked.
TECHNICAL DISCUSSION
6/7:
The wave-(4) is taking shape and there is clear evidence that it may be a broad consolidation pattern of some type. I say this for several reasons; firstly the decline down to these recent lows took the shape of a 5-wave impulse which at this stage of the trend can only be a wave-A. It cannot be the completion of a wave-(4). The weekly chart (refer video) points to a complex pattern because the wave-(2) was a simple zig zag and according to the Law of Alternation we should expect the complete opposite here at wave-(4). The complete opposite would be a broad sideways consolidation, possibly a triangle or even a flat pattern of some type. The demand volume seen at the recent lows adds weight to the argument that's its unlikely that we'll travel any lower from there. It may well be that we see a period of re-accumulation at these major highs and as we know, a wave-(4) is a byproduct of a re-accumulation phase. Because the weekly chart points to a longer time period for resolving this pattern we should now expect choppy activity between these levels for the next two months. These swings will offer trading opportunities, but longer term investors will require patience.
6/6:
The weekly chart suggests a major degree wave-(3) is in place so the wave-(4) should start taking shape. With the 5-wave pattern down off those highs I think it accurate to suggest that we're nearing the completion of a wave-(a) of a larger corrective pattern. The 5-waves down, so far, terminate near the lower side of the channel, but more importantly is the volume. Look at that volume starting to spike. I think buyers are in and if buyers are in then we may be due for the wave-(b) bounce. That bounce should take prices back to $5.00 being 50.0% retracement of the wave-(a) decline and coincide with the wave-iv of one lower degree. Bottom line here is that we should expect a bounce very soon that can be traded, but don't get to absorbed by the strength because I feel it will fail and lead to new lows.
This post may contain advice that has been prepared by Reef Capital Coaching ABN 24 092 309 978 (“RCC”) and is general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.