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Registered User
Joined: 12/8/2004
Posts: 1,301
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My analysis of KNDL is that on 10/25/05 we finished wave 3. I believe the stock is still in a decending triangle making up a complex wave(4). Am I correct, or am I completely nuts?
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Registered User
Joined: 12/19/2004
Posts: 457
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I took a look at the chart.
All of the waves on this chart look sloppy to me, so I don't have a high degree of confidence in this analysis.
Wave 1 on the daily looks a bit sloppy to me. I like to see 5 clear waves in the uptrend. In a typical 5 wave sequence, wave 4 never overlaps with wave 1.
But, if you allow for Pretcher's idea of a leading diagonal (a triangle 5,3,5,3,5) then this may be ok, as a diagonal triangle permits wave 4 and wave 1 to overlap.
The percentage gain for your wave 1 is 240%. Looking at your wave 3, it is about 2 times the size of wave 1.
Wave 3 is usually related to wave 1 by the ratio of 1.618, or 2.618. While there is nothing wrong with wave 3 ending here, there is also a possibility that this is NOT the end of the wave 3 uptrend, and that after a correction, wave 3,5 is on its way, so this may have a much longer way to go.
My target, using wave 1 length (240%) times 2.618 gives a length of wave 3 of 626.9%
Wave 2 low (5.14) * (1 + (629.9)/100))
5.14 * 7.269 = 37.43.
Given the strength of this uptrend, this is how I would look at it from the bullish POV.
The problem: when will the correction of wave 3 end? How far will it retrace?
Since the wave 3.2 low (date: 4/25/05) retraced 50%% of wave 3.1 (date 3/28/05), then it is more likely than not that wave 3.4 will come close to a 38.2% retrace of that big wave 3.3.
That gives me a target somewhere around 18.40. Doesn't look like we are close to that yet.
If the guideline of alternation comes up, wave 4 should be steeper and/or longer in time than wave 2, and more complex. We may see a something of a small rally, maybe even one that is slightly higher than the wave 3 peak, (wave B of 4) only to return lower.
Now, before I get your hopes up, there is an alternate count that is much less bullish.
How do we know for sure that your wave 1 really is a wave 1? We don't. I could also call it wave A of a correction of the downtrend. We don't have enough data to know where the stock is in the larger cycle.
That would make the end of your wave 3 a wave C, with the sharp run up being a wave 5 extension inside of a wave 3. The correction of a 5th wave extension, if you look at the guidelines, is the low of wave 2, or the 10 dollar level.
Given that both the mad bull count, and the more bearish end of C count, coupled with the fact that the stock couldn't break out from the all time highs, lead me to lean toward the bearish camp for the intermediate term.
Barring other evidence (ie fundamentals, bullish market outlook), if I were to trade this stock, I'd be a seller if it closed above 25.50, with a stop just above 26.50 -27.00.
I think any rally from these levels is a sucker's rally. The low on both the daily and weekly show momentum confirming the lows.
Do keep in mind, that initial trade idea is likely to be an initial whipsaw. You would short, get out, only to see the trade return to your entry price, or less, as the corrective rally could move up to at least 26 before really starting to decline.
Something like this had already happened to me in HOV recently.
I like to see at least a momentum divergence (short term) coupled with a longer term momentum reading before I hop onto the trend change bandwagon. The trend on the daily to weekly is still DOWN, within the context of an uptrend.
You might have to put the trade on a few times before you get it right.
If the trade went in my favor, I'd just use a trailing moving average. If you take a look at the 4/6/05 Worden Note, you will see how I use trailing moving averages, in addition to above (below) market sell orders, bollinger bands and momentum indicators, to take profits on trades.
I'd also pay particular attention to the stock once that initial fib target of 18.40 was hit.
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Registered User
Joined: 12/8/2004
Posts: 1,301
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For the record, I am short in this stock right now @23.15. You gave me a lot of information and now I have to see if I can make sense of it. Thank you for your analysis.
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Registered User
Joined: 12/8/2004
Posts: 1,301
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When you see such a long upward trend like the stock had in 2005 without any major corrections, couldn't you just "assume" that that portion is a 3rd wave?
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Registered User
Joined: 12/19/2004
Posts: 457
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Well, it is usually safe to consider those types of trends "impulse" moves of some kind, and usually they are wave 3, but those long types of trends could come at any portion of an impulse move (1,3,5), or it could be part of a zig-zag correction upward.
One of the things that distinguishes Neeley's counts from Pretcher's counts is that Neeley prefers to label things with corrective wave counts.
What I see as a 1,2,3 trend, a Neo-Waver would count as an abc-X-abc zig-zag. Later on in the trend, there will be differences in interpretation.
Suffice it to say, my counts are done using Pretcher's guidelines.
Curious, where did you put your stop? What were your price targets?
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Registered User
Joined: 12/8/2004
Posts: 1,301
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My upper stop was at 26.40, my price target is 18.37, but I would remain in the stock as long as it stayed in its downward 2% channel.
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Registered User
Joined: 12/19/2004
Posts: 457
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QUOTE (HaveNoCents) My upper stop was at 26.40, my price target is 18.37, but I would remain in the stock as long as it stayed in its downward 2% channel.
Interesting. Our targets and stops were pretty close. Perhaps Elliott Wave isn't as subjective as people think, once they take the time to learn the rules.
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