Chart of the Day: First Solar - Chart patterns and fundamentals

First Solar cut its 2011 sales and earnings forecast for the second time in two months and forecast 2012 profits below Wall Street's view, sending its shares tumbling 20 percent in premarket trading... yet for months the chart forewarned that lower prices were forthcoming. The consolidation  that began in 11/2008 (w.a) through 6/2011 (w.b) best fits a triangular pattern that occurs prior to the final wave in a wave sequence. As such, triangles can be found in waves B, X or wave 4 positions.

An elliotician would not have gotten too excited on 12/7/2011 when the company reported that they sold specific assets to Berkshire Hathaway. The stock spiked $5.78  ( refer to a daily price chart, not shown) before closing up a meager $1.88. I do know what Warren Buffet's strategy is for solar assets but judging from this chart, there may be more risk to the downside for this company and the industry as a whole before making a meaningful low.

Best of Trading

Market Swings and Deep Retracements

Do recent market swings and deep retracements have you confused? If so, bring clarity to your trading by taking a top down approach rather than focusing on the time frame that you trade.... much like working a puzzle.

Start your analysis, the same way you work a puzzle... that is, look at the picture first !  Looking at quarterly, monthly and weekly charts will allow you to gain insight as to how the lower time frame wave pattern fits into the  "BIG PICTURE". 

Let's look at an example that is possibly unfolding right now in currencies. The markets have been highly correlated to the EUR-USD pair and therefore I'm looking at the Euro for clues to explain the deep retracements and overlapping waves.

Did you miss this contracting triangle?

Triangles are important to an elliotician as they forewarn that an advance, or decline has about run it's course. The pattern, is considered a continuation pattern and occurs prior to the final wave in a wave sequence. As such, triangles can be found in waves B, X or wave 4 positions. At the quarterly chart level, we see a possible triangle occupying the w. B circle position that may be followed by a five wave sequence to complete w.C circle.

Dropping to the monthly chart, we can see the subdivisions of the pattern. Notice that each wave is made up of three wave zig-zag patterns that are common to triangular formations.  That being said, the question that remains is whether the pattern is complete as indicated in the quarterly or requires another up sequence to complete w.(E) as shown in the monthly chart.

Now review your weekly, daily and 240 minute chart levels and you should be able to accurately forecast and anticipate the next move in multiple markets.

I hope you found this trading lesson helpful.

Best of Trading

Trading Lessons: Accurately Analyzing MACD Divergences

Every Friday I dedicate my day to working in a Trading Lab to either developing new trading ideas or enhancing an existing trading strategy. This weeks trading lesson is based upon two hypothetical trades that I made during Friday's session and focuses on accurately analyzing MACD divergences and how the indicator can be used to confirm your elliott wave analysis.

Numerous professional traders dispel the use of divergence analysis but as you will see, when used to compliment your elliott wave analysis, divergences can help confirm your count and assist in determining market tops and bottoms.

I hope the examples contained within the following video will encourage you to do your own analysis and become confident to act on divergence analysis.


Best of Trading

The Market Pulse

Announcements

Most of my readers are aware that I have been working on building a website that is more suitable for educating interested parties. It is apparent through the frequency and engagement of my readership that my content is valued. I thank you for your support. While my newsletters are meant to be educational and illustrate the application of Elliott Wave Theory, I'm aware that the possibility exists where readers may be making certain assumptions and or investment decisions based upon my work even though no advice has been specifically provided.... and therein lies the problem according to my attorney. I need to take precautionary steps  and rethink how I can deliver content while protecting myself from "people just being people" . Therefore, until further notice, I will need to discontinue my newsletter services. I know that many of you look forward to reading my newsletter but I must take these steps. With your understanding and cooperation, I hope to find a temporary solution before launching my new site that gives readers the tools, insight and strategies to achieve trading success using elliott wave.  

In the meantime....


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$ES_F: FLASH ALERT

A quick update of what I've been watching all day. As you know I've been calling for upside potential to 1242-43 (see The Market Pulse for details ). The pattern appears to be unfolding in a w.4 combination, where w.y is a triangle. Patterns of this nature are continuation patterns. Therefore, I continue to look higher in this market.

Expect the remainder of the pattern to unfold as indicated. Each wave of the triangle is a three wave structure. Only a loss of 1217.5o would concern.

Let's see what happens.

Best of Trading

The Market Pulse

In yesterday's video edition of Heard on the Street, I showed this chart and mentioned that I believed that the market would take out the shorts who had placed their stops just above the minor w.4 crest of 1229.75. The chart is updated through today's trade and to the untrained eye it appears that my analysis was incorrect. 

Yet, sometimes the daily session isn't enough to provide the entire picture. Sometimes we need to watch the globex session and or the Cash to gain insight to what's really happening. Notice from the above chart that the "all sessions"  DID print above the w.4 crest. In fact, it did so on the ES_F 240 min chart level (not shown) within the 8:30 am price bar.

While the minimal requirements have been satisfied to complete w.a circle, there remains the potential for further upside. A loss of 1185.25  (see first chart) would increase the likelihood that w.a circle had completed and that w.b circle is underway. Likewise a print beyond 1221.5 (ES1-057) or 1330.75 (ES_F) would mean that w.a circle was still subdividing and reopen the case for the 1242-43.

At the 5 min chart level, today's decline looks to be in three waves and what I have labeled as w.(c) has a shallower slope than w.(a).... that's corrective! So I won't be surprised to see some type of retracement either in the ON session or in tomorrow's trade. 

Let's leave it there for tonight and see what develops.

Best of Trading 





Heard On the Street

The Market Pulse

Today's price action may constitute a reversal as show here in the CASH, but not as dramatic as in the emini S&P (see below).

There remain several possible counts due to the fact that there have been no discernible retracements from which to accurately draw any high probability conclusions.  While the chart above depicts a w.a termination, I can easily argue that the advance isn't complete. Therefore , it's best to step aside and wait for the market to show us some more pieces of the puzzle.

At the daily chart level of the emini's, today's session formed a bearish shooting star right at structural resistance. The candle implies a reversal as sellers entered the market. I'd like to see follow through and a closing of the gap to bolster the bearish case for a w. b decline.

My reasoning for the above statement is due to the fact that allot of weak shorts have their stops just above the 1214.5 and 1229.75 swing highs and as we all know ... the locals and bots love to hunt stops and inflict pain on the most market participants. Some shorts were flushed today as priced reached an intraday high of 1216. Th fact that I can't offer a high probability count at this juncture has be thinking that the potential for a reversal may be a head fake to the downside that will ultimately reach  a point where w.c = w.a at 1233. Only thereafter will the market lower.

Watch the ON session for clues.

Best of Trading

Chart of the Day: A Telling Trend in PowerShares DBA

The weekly chart of the PowerShares ETF, ticker symbol DBA is showing the continuation of the recent bearish trend. DBA completed cycle w.b at $35.58, followed by a five wave leading diagonal that set the stage for further declines in this ETF. Subsequent price action continues to exhibit impulsive behavior signaling further rounds of selling and the continuation of the bear market for Ag shares.

But first, DBA must complete w.(2). Preliminary targets for the W.(2) advance surround the .50-.618 retracement of w.(1). Thereafter, this ETF should fall on itself and the Bears shouldn't relinquish control until price has fallen below $22.50 w.a.

If you are interested in this ETF, I'll be following DBA throughout the remainder of the year with periodic updates and conclude a summary recap in my year end Global Gains Perspective.

The Market Pulse

ANNOUNCEMENTS

A bit of housekeeping is in order before moving forward with tonight's call.

• In Sunday's edition of Heard on the Street the following charts of the emini S&P where provided and I need to clarify a point. If you look closely at the charts, you'll notice that w.(1) is located a different price locations on the charts. This is not by accident but a failure on my behalf to properly identify that one is an alternate count of which I will address in tonight's call.

• In this chart of the Canadian Dollar, I interpreted the structure as a flat correction, primarily due to the fact that w.B circle has retraced near 90% of w.A circle. However, the structure can't be identified as such as w.A is clearly five waves and therefore the correct identification would be that of a zig-zag. (5-3-5). While the retracement level is not ideal,the pattern is valid since the only requirement for a zig-zag is that the B wave can't go beyond the origin of the A wave.

At the daily chart level, impulsive behavior to the downside confirms the count and another round of selling is required to complete w.(1). A print above .998 before making a new low would bring into question that another pattern is developing.


S&P




There are multiple ways to count the advance from 1068 in the ES_F or 1074.77 in the CASH. In the absence of any sizable retracement to hang my hat the daily chart level offers the clearest count.

Here I'm working a five wave advance and looking for a small retracement tomorrow or in the ON session followed by another rally to complete the advance. Notice structural resistance comes into play just above the market.

Yet another possible count is where w.(2) unfolds as a simple zig-zag. I have placed three expansion levels on the chart for your review. Notice how price disrespected the first level of resistance... a sign of strength. Price is approaching the second target and I'll be watching how price reacts to 1202.25, where w.c=w.a. Should a decent retracement not occur, odds are the market will push to the upper target, which by the way fits with the 2007-2011 analogy i.e. a retest of the neckline.

Let's see what happens tomorrow.

Best of Trading

Heard on the Street: ES_F, DAX, CAC40, Australian All Ordinaries, Taiwanese SGX, Canadian Loonie, Swiss Franc

The Market Pulse

Here is the 20 min chart that I left readers in last nights FLASH ALERT. As you can see, the market made a .236 retracement of w.(iii) and has advanced just past the upper fib target of 1137.75.

I've updated the wave labels through today's close. Notice that I've added an additional fib level of 1141.5. Given that price nearly tagged this level, the slope of w.(v), diverging momentum (not shown) and weaker internals.... odds are high that this sequence is complete.

For the ON session or in tomorrow's trade, the count suggest that a w.(b) will unfold in three waves. Prints below the w.(iv) low of 1109.5 would provide the initial evidence to call w.(a) complete while prints above 1141.25 would negate.

As a reminder, I'm not sold on the fact that 1068 is the LOW and the price action is sloppy from 1229.75. Needles to say... I'm watching this market very carefully.

Let's leave it there for tonight and ...

Best of Trading

ES_F : Flash Alert

Today's trade reached my 1165-66 lower price target, yet the waves don't count well. The above chart is provided in response to a tweet that I made. I said, "Readers who may be utilizing an ending diagonal would be accepting a less than textbook pattern". If you calculate the waves as labeled, each successive three wave decline from the w.4 high is greater than the prior. Therefore, I would assign a very low probability to it from an academic level.

While I have not had an opportunity to review all the intraday charts at this juncture I wanted to share what I have discovered and what I'm looking for tomorrow.

The next series of charts show momentum signatures. Each is self explanitory and implies that the "risk" is now to the downside... meaning the likelyhood for significant further declines are greatly reduced.

Also, note that price tagged 3-Sigma that contains 99.9% of all price movement and has bounced.

Heavy volume came into the market around 3:30 EST, in what I am labeling w.(iii). For the ON session prices should drift lower to either the .236-.382 retracement of w.(iii), followed by another advance to where w.(v) = w.(i). Note that I am not calling a bottom yet. I'm only evaluating the wave structure from today's low. More evidence is required to conclude that the selling that began from1357.25 had ended and that a tradeable low is in place.

Whether the initial five wave advance completes in the ON session remains to be seen.

Let's see what unfolds.

The Market Pulse

A Bearish Continuation

Today was really exciting if you were following along with the call from Heard on the Street. Of the markets I featured, Crude (2.50), Copper (7.60), Euro (.02) Nasdaq futures (70), Emini S&P (40).


What we learned today

• The Euro and the emini S&P remain tightly correlated.
• NQ-057 confirmed that w.2 had ended on 9/20/11
• ES-057 eliminated two bullish alternate counts.

Nasdaq

Today the Nasdaq futures gapped down at the open confirming what I believe is 3rd wave price action. The break of w.x low confirmed that the high made on 9/20 is complete and that new lows should follow over the next few days.

Although there are several ways to count the decline from 2285.25 (w.(ii) crest ), I'm looking down in this market. My initial w.(iii) target remains at 1981. Technical studies do not suggest a w.(iv) bounce. However, should one develop, price should stay below 2144.5.


Emini S&P

This chart was featured in Heard on the Street  as alternate counts where w.4 or w.(2) would
unfold as a flat correction. Both these interpretations were eliminated today due to the fact that price made a new low.

So that leaves us with two counts. An expanded flat with w.B targeting 1146 -1165 as in the above weekly chart and...

where w.5 is unfolding. The minimum expectations have been met to conclude that a five wave decline now exists from 1357.25. I haven't defined clear targets as the count still needs to prove itself by continuing to act implusively and extending further to the downside. A rotation back above 1106.75 would concern. There are several fibs that may provide support but a fib cluster surrounding 1165-66 provides the highest probability zone to look for a reversal.

Now that five waves can be counted, the implications are very bearish as a three wave relief rally {w.(2)} should follow that once complete will be followed by an even larger five wave decline w.(3) that draws price significantly lower than current levels.


Let's see what develops overnight and watch the Euro for further tells about the ES_F short term direction.


Best of Trading

Heard on the Street: S&P, Nasdaq, Crude Oil, Copper

In this weeks edition of Heard on the Street I'll cover the emini S&P, Nasdaq, crude oil, and copper.


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The Market Pulse

A Recap of last nights post. 

As I stated in last nights blog post, "yesterday's rally puts pressure on the count to perform to the downside tomorrow in a big way or it is appropriate to discuss some of the alternate counts. If you missed the call, click here.

Since the market didn't follow though to the upside and fell hard, my preferred count remains that of a  fifth wave decline while remaining nimble enough to recognize that the alternate counts presented in last night's blog post would be deployed should price exceed 1190.

And here is the 240 minute chat level. For tomorrow, the count implies a 3rd of a 3rd and therefore we MUST see a duplicate of today's price action (hard down) for the count to remain on track.

Note: I'm not going to mention any downside targets until I have confirmation that the preferred count is correct. We know at a minimum that the market should draw to new lows which is 52 points lower than today's close. We have plenty of time to fine tune any further downside potential.


Let's see what happens.


Best of Trading

Updated Chart of ES_F

In last nights edition of the Market Pulse, I left readers with this chart. As I mentioned the wave structure and depth of the rally was bothersome, yet I decided to stick with the count as it appears on the chart.

While I felt that 1166 - 68 was a high probability level for the terminus of w.iv, given that most corrections don't exceed the 1.618 of w.a of the structure and that the count would be invalidated with a print above 1185... the w.i low (red dashed line).

During today's session price not only exceeded the cited fib levels, but almost hit the .786 retracement of 1191.75. This puts pressure on the count to perform to the downside tomorrow in a big way or it is appropriate to discuss some of the alternate counts so that we can be prepared for any further upside potential.

First, the wave pattern from the w.3 low is clearly sideways and NOT impulsive.  I have a great deal of confidence that what we are witnessing is just a correction  and .... when complete, will be fully retraced.  

Since there is a great deal of noise on at the 240 minute chart, I referred back to my daily chart and noticed that I could also make a case for the following two counts:

A flat w.4 or w.(2).

Each would allow for a w.c =w.a @1239.5.

Let's see what develops tomorrow. Expect further commentary on these alternatives as well as a recap of what transpired in tomorrow's edition of the Market Pulse.



The Market Pulse

Today's price action brought uncertainty to the wave count. After hours of deliberation, my preferred count shall remain w fifth wave decline but the magnitude of the move from w.iii blue low is deep and appears to be incomplete. Look for upside potential to 1168.25.

Dropping to the 7200 tick chart, I've labeled the subdivisions from w.iii low where the market is making a (W)-(X)-(Y) where w.3 circle red is complete and I'm looking down in the ON session followed by another push that completes at 1166.

While I am cautious this market, the overall short term wave count suggests that 1166-68 is a significant area to watch.

Let's see what happens and remain flexible until market either tips it's hand that the next round of selling has begun or whether a suitable alternate wave count is necessary to explain price action.

Best of Trading

Heard on the Street: S&P, DAX, CAC40, Crude Oil, Silver, Nasdaq

Announcements:

Over your investment and trading career, I'll bet you've subscribed to a few newsletters. While there may be several reasons for doing so, one thing that bothers me about a service is that there's allot of filler content. If you're like me, I just want the meat and potatoes and hold the veggies! Put another way, just show me the charts. 

As most of you are now aware, I'm building a new website that will better serve a community of elliott wave traders and enthusiast. My content and the way I present it is ever evolving and in this weeks video I will be providing a more comprehensive overview of  the global markets. While I'll spend less time on each market, the multiple time frame charts and analysis is broken down with elliott wave labels and concise commentary.

I'd like to get some feedback from readers as to whether you like the shortened version that gives you just the counts vs my previous more detailed explanation of how I arrived at the wave count. Which is more important to you?





Tags: Heard on the Street, S&P, DAX, CAC40, Crude Oil, Silver, Nasdaq

Flash Update: ES_F

Last night I told readers that 1228 was the key downside level to watch. Based upon the ON session, the opening gap and the fact that price has traded below 1228  increases the odds are that the triangle interpretation will be eliminated and the other working interpretation ( a fifth wave decline) has prevailed.

At the 60 minute chart level we can see how price has touched the lower boundary of the price channel and that I'm working a w.iii circle count. However, just because I count it as such doesn't mean that I can confirm it due to the fact that price has yet to confirm the presence of a third wave i.e. by pushing through the lower boundary of the channel. Once it does, odds are that the internal structure is properly labeled and that an initial target of 1066 should be reached.

Let's see what happens.

The Market Pulse

Humpty Dumpy Sat on a Wall...

Humpty Dumpty Had a Great Fall

Excuse me for finding humor in today's delayed  FED announcement but by judging all the twitter comments, it seemed that most traders were sitting on the edge of their seats waiting for all the King's Horseman and all the Kings men to put Humpty Dumpy back together again.

The delay in the FOMC statement must have been due to the fact that Ben Bernanke, the King of the helicopter, was playing the nursery rhyme for minutes before the actual announcement due to the fact that he knows he has failed and the CNBC market headlines now read.... " Economy in Congress's Hands as FED Runs Out of Bullets".

So while Congress, the King's Men, try to put Humpty back together again, we wavers simply laugh and find the trading answers right on the charts.

The Nasdaq

Sunday's Heard on the Street video , subsequent edition of the Market Pulse and Before the Bell update, laid out the expectations calling for a top to be made in his market. If you want to see the progressions of analysis, I'd recommend reviewing those calls as the the top was nailed. The above chart is updated though today and by all indications, the Nasdaq has fallen off a wall.

While encouraging that w.(iv) support has been breached, to bolster the bearish case, I'll need to see price trade below w.(i) crest of 2201.5 and ultimately a break below w.x circle of 2108.25 to completely put a fork in this market.  As a reminder, price action should confirm the count and trade should be impulsively to the down side in fast turnover as the count indicates that we're in a 3rd wave... the most violent and destructive wave within a five wave sequence.

And here is a 7200 tick chart. Notice I'm working w.3 of w.(iii) down and I'm setting critical resistance at 2280 to maintain the bearish view that minor w. 3 red is underway.  As long as this level holds, expect the Nasdaq to lead the other indices lower.


S&P


Both scenarios that I laid out in Sunday's edition of Heard on the Street are still viable and as I mentioned that the move down from 1214.5 would determine which interpretation was correct.

Below are the two interpretations in no certain order of preference:

Price is approaching the 1148, ideal target for w.d circle which would be followed by another three wave advance to complete the triangle and w.4 red. While a decline below 1148 would not directly negate, prints below 1228.75would (see below).

A break of the corrective price channel would bolster this view and a subsequent close below 1128.75 would effectively eliminate the triangle interpretation.

Best of Trading

Before the Bell: Updated Chart of Nasdaq

From last night's edition of The Market Pulse, the above chart was presented. As you can see price has reached my target. Please refer to my original post for further details as additional upside may exist.

Interestingly, the emini S&P traded down last night and as I woke, found that a reversal has been made. To say the least, the move has got me on the edge of my seat. However neither market is confirming the other leaving this early strength questionable.

I'm watching for a bullish trap in either market.

let's see what happens.

Before the Bell: Updated Chart on Copper

This update is a follow up to my call that was made on September 11, 2011 in my weekly edition of Heard on the Street.

At the weekly chart level, price has confirmed that the next phase of heavy selling is underway as the w.1 circle extreme was taken out in five waves (see daily chart below).

My current interpretation is that w.3 circle is underway and minor w.1 red has completed and a choppy, counter trend move will develop lasting to at least 9/27/2011, possibly into the early pat of October. Preliminary termination points are where w.2 = .5 w.1. I'll tighten up the target once w.(a) and w.(b) of w.2 are complete.

Once w.2 is complete.... the market should fall in a 3rd of a third (see chart progression) that eventually reaches the w.3 circle low of 305.5.

Best of Trading



The Market Pulse

In yesterday's edition of Heard on the Street , I detailed a likely scenario for the Nasdaq, that I think it is worth reviewing, in that, the market and it's wave structure was clear to me. My point being, why do traders struggle and beat their heads against the wall trying to figure out what a particular market's position is? Why not trade by finding easily recognizable patterns and then trade your plan?

Let's quickly recap the call and what transpired before moving on to the S&P.

Above is the chart that I left readers with looking for a decline to 2252.50. Prices decline to 2254.25 and then rallied to new highs. The new high fulfilled the minimal requirements for w.(v). The fact that price has broken back below the w.(iii) crest could be problematic for achieving any further upside, especially as the DOW and S&P do not confirm such behavior, yet....



.... at this juncture we can't rule out the possibility based upon this chart. I"m not going to rehash the material and the case for further upside (See Heard on the Street for more detail). Breaks below 2254.25 would most likely indicate that w.(v) of w.2 red had completed.


S&P

A Triangle

Today's price action didn't bring any clarity to the picture. Several interpretations remain, the top two being that w.5 is underway or a w.4 triangle is still unfolding. The above chart shows the triangle interpretation. Notice that I've identified the wave structures in 3 waves where w.(c) of w.d circle = w.(a) at 1170.25. This is my minimal target expectation with further downside to 1148 where these first three legs would represent a larger a-b-c consistent with the 240 min time frame (see below).

A Fifth Wave Move

The move from the w.ii crest can also be counted as a perfect impulsive wave. I haven't labeled the internal subdivisions but w.iii = 1.618 w.i and w.5 = .618 w. {i-iii} if you do your homework.

Regardless of which interpretation is correct, both views continue to look down, consistent with yesterdays call. At the time of this post, the market is down 8.25, a good sign. The next move down will determine which count is right.

If the w.5 count is correct, then the ON session and tomorrow's trade will be relentlessly down on fast turnover. If it isn't, then odds are that the triangle count is more likely.

The key takeaway from each interpretation is that eventually, price should carry below 1097.

Let's see what happens.




Best of Trading

Heard on the Street

A Week of Confusing Price Action

Yesterday I spent 6 hours looking at multiple markets and concluded that there's allot of difficult chart patterns and questionable wave counts. Complex corrective phases are often the culprit, offering uncertainty until the wave pattern is nearly completed.

In this weeks video, I'm updating you with my counts for the emini S&P, Euro and Nasdaq.

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Subscriber Request : EUR-USD

At the daily chart level the Euro is tracing out an impulsive w.C of w.(a) of the larger weekly W-X-Y (Double Three) or contracting triangle pattern. Preliminary targets for w.5 of w.C of w.(A) completion are 1.3272- 1.3429.

Note:  w.C = w.A @ 1.3439 (not shown on chart). Breaks above 1.4047 invalidate this count.

Put it all together by watching this weekends edition of Heard on the Street.

Best of Trading

Updated Chart on ES_F

Here's a possible count detailing price action into the 1210.75 target. Price has traded slightly beyond this key level. With technicals weakening and a bearish shooting star candle that will confirm at 10:30, odds favor a possible reversal here. Breaks below 1181 would bolster the case.

Best of Trading