This write-up will cover the Bull vs. Bear thesis for this instrument. If you find this useful, perhaps you’ll find that InvestingAngles.com can be beneficial to your trading experience.
The above monthly chart depicts two paths for this instrument: 1) Bullish path/count in yellow, and 2) Bearish count in white.
Both paths should also satisfy the Andrew’s Pitchfork median-line tag; it will be interesting to see who prevails moving forward as both paths have almost an equal chance from here.
BULLS VS. BEARS:
The weekly candle close was bullish, and it opens the door towards higher prices, but bulls still have two main hurdles to overcome: 1) Just after the recent high was made, there was a very strong bearish engulfing candle that set the top (see below chart, red arrow). In order to negate the bearish forces, a weekly candle will need to convincingly close over the open of this candle at $383.79. 2) MACD on the weekly tf is bearish and will need to flip bullish to support a continued move higher.
The 12hr tf shown above captures what could be all of this potential yellow wave (3). The channel over-throws for waves 3 & 4 are typical for EW and as long as PA doesn’t go below that red line (wave 1 high), this count is still valid – to note: the duration of yellow wave 2 compared to yellow wave 4 is about as long as one would expect; therefore, if PA does create another lower low, it would strongly suggests this count is not valid.
The 2-day candles recently confirmed the bullish harami combo, and the last candle close negated the immediate bearish forces placed on this instrument from the last red candle.
On Monday, the above 3-day candle will try to confirm a very short-term bottom by closing over the pervious candle.
Zooming out on a yearly tf, one can observe that the only other time this instrument experienced a bearish engulfing candle on this tf (red arrow above), it was followed by a bullish harami combo that was confirmed, which started a new uptrend. Although the sample size is small, perhaps this is what is occurring atm, as the last candle that closed on this tf was a bearish engulfing (BE) candle, and the current candle could very well create a similar bullish harami combo.
The above 6-month tf shows the subtle differences between the two BEs on the 12 month tf. The first one (red arrow) was much weaker of an engulfing candle than the recent one that marked the top. One can observe from this 6-month tf that their engulfing candles are very different, as the first BE candle (red arrow) only engulfed 1 prior session; whereas, the most recent BE, engulfed two prior sessions and closed halfway down on the third session (suggesting a strong top is in place). Until a candle on this tf can close over the open of this recent BE candle at $399.05, bears are in control. Although the large green candle on this tf is very strong in appearance, it hasn’t done any damage to the overall bearish landscape that was created with the BE.
The above 2-month tf is of great interest, as it appears to be the tf to observe for triggers. The glaring similarities between the two BE candles can’t be ignored (see red arrows above). The first BE is much stronger in appearance as it engulfed three prior session; whereas, the more recent one only engulfed one prior session. What’s surprising, is the MACD has remained bearish on this tf, even with the recent run up from the lows – IMO, this is a clue.
Above, this chart is still on the 2 month tf, and in looking to the past to help guide the future, one can see that two similar set-ups marked other significant tops. IMO, this current set-up, with two BEs marking the tops, should rhyme with these.
The above monthly tf is also very interesting to observe, as the last significant top was created with a tower top formation, and the most recent top, was also marked with a tower top formation (red arrows). There is confluence between these tops, suggesting bears have a slightly better chance atm.
The above daily candle landscape has a 3-gap up formation; suggesting exhaustion could be nigh if not already here.
Given the alignment between the bearish set-ups on larger tfs, it is difficult to see the bullish path being the dominate one, atm. To add some more confluence to the bearish set-up, note the 12hr tf above, and how the potential wave 2s both retraced to the same fib – 0.786 (a very common occurrence in EW that suggest harmony between the waves).
The above chart captures the recent moves off the lows on a 20m tf. It is hard to get an impulsive count off the lows, unless one creates a series of 1:2s (it would need four series of 1:2s to be a valid impulse, this is not common in EW and the look of each wave doesn’t support this thesis, but it can’t be ruled entirely out). This corrective count fits the rules of EW very cleanly, and with this in mind, one can try to decipher the recent (bullish) candles on lower tfs and rhyme them with the larger (bearish) tfs.
The above chart offers the primary bullish and bearish paths moving forward.
The thought behind this above chart is that the most recent wave down is an expanding diagonal (this thought fits the profile of an expanding diag very well). Per EW, diagonals are at the end of a wave or at the beginning of a wave.
In the bullish case/count, this last wave down completed the yellow abc count, and the thesis of having four 1:2s off the recent lows would play out. If this is the case, then the yellow path should resume higher after a very brief consolidation period. Waves that follow ending diags are normally very robust, with minimal consolidation periods – perhaps one or two of the daily gaps could get filled before resuming the path higher. $358 region would be the lowest one would want to see PA reach before reversing towards higher targets.
In the bearish case/count, this last wave down completed wave (i) of a much larger corrective wave down, with wave (ii) in the works.
Per EW, diagonals normally return to their origin with very swift moves – hence the current environment that strongly supports this diag. thought. Per EW, wave twos are normally longer than wave ones, and with this thought in mind, the white path depicted in the above chart would satisfy that rule and also satisfy candles on smaller and larger degree tfs. PA could even strive towards that red line above for the white c.
Assuming this white path is primary, then it suggests a volatile ride down to close out November, keeping the monthly candle bearish, followed by a rise into the beginning of Jan that would coincide with seasonal bullish forces, followed by a steep sell-off to begin the year.
If the white count does play out, then the above monthly candle could morph into a gravestone/shooting star doji followed by a green/deceptive candle for December that would not engulf the upper shadow of the gravestone/shooting star doji; if the yellow path plays out, then the above monthly candle should form a strong bullish engulfing candle that will be confirmed with a green candle in December – this green 2-month candle combo should negate the recently formed Bearish Engulfing candle on the 2-month tf (this is not a common occurrence and would create a false “bearish” signal on a very high tf).
The goal of markets is to encourage participation to build liquidity; this past week did a great job of doing that. Time and candles will tell which side will prevail. For now, bears are in control, but only by a narrow margin. How November’s candle closes will be critical in assessing the next path/targets.
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