H&S Update 8-17

Update: I will also add that wave (c) of MINOR B = 1.618 x (a)= 970
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I apologize if this chart is busier than ever. I just wanted to show how the H&S played out compared to my previous chart.

I don't have much more to add at this time other than to keep an eye on the 960 level.

Why I am expecting 960:

1. The lower trend channel line will keep it honest. (http://waveprinciple.blogspot.com/2009/08/channeling-p2-zigzag.html)

2. If wave iv of (c) of MINOR B completed today, and v began, wave v would end near 966 if it is equal to wave i of (c) of MINOR B.

3. The distance of the top of the head (1018) to the neckline (992) is 26 points. So the expected move is to the 970 area. This could be more or less.

There is talk of a much lower move and it is possible if my alternate count is the true count. However, we won't know until price makes it to 960 and breaks below the lower channel line.

Let's see what happens!

RIMM

The Elliott Wave Principle is best applied to large indexes/commodities where there is mass participation by the investment community. EWP generally states that counting waves for individual stocks is not recommended or worth the effort unless there is an unmistakable wave pattern developing.

I believe I may have spotted such a pattern with RIMM. I will say this, in the chart above, I did not attempt to nail down the exact wave degree for my labels. What I think is more important for a trade in the near/intermediate term is that a zigzag pattern is developing with wave C in progress (Or a wave 3 of a larger impulses) Either way, both would imply that we can expect to see a 5 wave pattern down for RIMM.

There are 3 main points that I want to highlight for RIMM's current situation:

1. As I mentioned above, there is a clear zigzag (ZZ) in progress (Or again like I stated, I can also count a new 5 wave impulse decline, but I won't do that yet because this would imply RIMM may fall to $15/share, which would take it back to it's 2004 price. However, this is something to consider if P3 in the SPX is as large as anticipated and this would fall right in line). Anyway, sorry for digressing.

Going back to the ZZ. A ZZ structure counts as an ABC pattern with a 5-3-5 subwave structure. Blue wave A shows 5 clear subwaves in red (lower roman numerals). Blue wave B is a very clear abc subwave. What remains is wave C and that should consist of 5 subwaves.

So far with the pullback from Wave B (blue) it looks like Wave C may have traced out subwave 'i'. Subwave 'ii' of C is in progress or may be complete. I would expect subwave iii, iv and v to take RIMM lower.

I used the common Fibonacci relationships when it comes to Waves A and C to highlight potential price targets as follows:

Wave C = .618 x A = $66.66
Wave C = A = $57.9
Wave C = 1.618 x A = $43.91

2. Head and Shoulders Formation

Don't know why but I've just been on the lookout for this formation lately. To me for some reason this pattern is sticking out. Take it for what it is but what I find interesting is that if you take the expected price movement should this H&S play out (measured by top of head to bottom of neckline), it falls right at the equality relationship for wave C and A.

3. April Price Gap

If price were to return to the $57 level, this would fit in nicely with price closing the gap, which is something to be expected.

I think for fun I will make a bold prediction and say that RIMM will trade back down to $57-58 by the end of the month. Why the end of the month. No real reason other than the fact that Blue wave A and B both took about 1 month to develop so I figured Wave C may already be halfway there.

Let's see what happens

Channeling A P2 ZigZag and Fibonacci Projections

Can trend channels provide us with a clue?

Price broke below the center line and has backtested it without successfully breaking above. This, along with a price retracement to the 38.2% level may signify the end of Minor wave A with Minor wave B in progress.

960 looks like a good level for a pullback to complete Minor wave B. This would respect the lower trend line and make for a 38.2% retracement. Though a 38.2% retracement would be shallow, it would make sense given the strength of the market (dip buyers at the ready) as of late.

Where will it all end? Once again the trend lines may provide a clue along with the retracement levels from the Oct 07 - Mar 09 decline.



On Tues 8/11 I posted on this same topic: http://waveprinciple.blogspot.com/2009/08/price-projection.html.

Nothing has changed other than what the count may be once price falls to this level. What that count may appear to be is possibly Minuette wave iii. If this occurs, this would make sense as part of a 5 wave structure to form Minute wave C to complete Minor B right near the lower trend line of the channel.

H&S 8-14

Once again I revisit this topic. I still have a feeling this formation is under the radar. It's good I don't have many followers so it remains a secret ;).

A couple things:

1. H&S:

I just can't ignore this formation. Granted the form may be developing at an angle and appear asymmetrical (right shoulder higher than the left) it helps to see it clearly with the trend lines (purple) drawn in. Notice how the trend lines are parallel. To me, that looks fairly balanced.

If you recall in my previous post (http://waveprinciple.blogspot.com/2009/08/head-and-shoulders-revisited.html), I projected that the next wave would be a wave B (I'm starting to think was minuette wave ii may count better) that "may turn out to be complex or a triangle of some form to make the shoulder broad."

So far so good. It certainly has not disappointed yet. The shoulder became very broad over 8/12-8/13.

So let's keep this formation on the radar. Of course we should also be aware that it could easily break down just like the previous one right before the start of the monster rally in July.

2. 5 Waves for (a) of Minor B [or Minuette i of Minute A of Minor B]:

I can count 5 waves down for (a) of Minor B. If this is legitimate, then I should expect another 5 waves down for (c) of Minor B.

Going into today's close, wave 1 complete and 2 should resolve itself next week.

3. Resistance at 1014

1014 marks the 38.2% retracement level from the decline that began in October 2007 to the March 2009 low. Price has attempted twice now to break above. The first occurring 1018, the second attempt with the right shoulder and possibly a third attempt come Monday, which may fall short.

I'm sure there is more but that is all I can think of for now.

Dan and OnChiOnly have very good counts that considers a triangle for Minor B in the works. Based on their counts, we are to go higher next week. Something to keep in mind.

http://danericselliottwaves.blogspot.com/2009/08/elliott-wave-update-14-august.html

http://onechionlyselliottwaves.blogspot.com/

If you are to follow my count, I would say the two levels to focus on would be:

1012.44 - Break above this and the count is invalid
992 - Break below and we continue counting waves down up to 5.

Have a great weekend!