Successful traders are generally contrarians in the sense they do what the masses find difficult, and thereby profit from it.

It is hard enough being a technical analyst without getting flack for believing in "voodoo" or "tea leaf reading" from the fundamentalists.

It's even harder being an Elliott Wave analyst when the prominent spokesperson for Elliott Wave has been a permabear in a historic bull market.

Such errors are believed to be the fault of the theory used. But is that really so? I thought a review of my posts since January would be informative.

1. Kendle International (KNDL). HaveNoCents asked me for a wave outlook on this stock way back on February 08, 2006:

RMR elliot wave help please.

I provided both a bullish and bearish Elliott Wave outlook, and sided with the bears.

Bullish outlook:
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 target for wave 3.5 peak.

Given the strength of this uptrend, this is how I would look at it from the bullish POV.

Bearish
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.

Result: Stock made a high at 41.11 on 5/5/06, with resistance being focused around the 37.50-39.00 level.

Was this the fault of Elliott Wave, or was it my error?

2. ATMI: On February 26, HnC posted a bullish outlook, which I disputed.

Possible elliot trade ATMI

When I can't use waves as targets, I resort to Bollinger bands and a 21 period moving average.

Based on the momentum indicators, I'd expect a rally to about 31.80, with a max move around 33.50 (the 1 SD BB). Perhaps for a swing trade this would be ok, but if it came near your targets, I'd be a seller, for standard technical reasons.

If anything, I think at most this may retrace 38.2% of the decline, only to further violate the lows.

Interestingly, the 21 day moving average target coincides with the 21 week 1 SD Bollinger Band.

Volume would lead me to think this correction has farther to go. Prices broke down on high volume during the first wave down. The retracement showed above average, but lower volume than the downleg, confirming the downward trend.

The low last week shows very low volume. It is hard to tell if it is lack of selling pressure, buying pressure, or both. What is really needed is a good volume day with a candle reversal--ie. a bullish white line.

All in all, I think the bulls have more to prove than the bears at this point.

Result: ATMI rallied briefly to the suggested resistance point (31.50), put in a slightly lower low on March 9, rallied up to the second resistance point (33) on April 21, only to trade much lower, where it is now around 25.50.

3. GOOG

Google

On March 25, I wrote:

FWIW, I'm of the opinion that Google completed its bull market, 5 wave advance at the January high. The real question is the structure of the correction.

I see 2 possibilities--a complex correction that takes google in a sideways to downtrend, with a potential counter trend rally that could slightly exceede the January high--a so-called "irregular" correction in Elliott terminology. While possible, that is unlikely in this case.

The more bearish alternative is that the initial leg down to the February lows could be the end of wave 1. The entire action from that initial low could be a wave 2, and this rally could be c of 2.

Wave 2 retracements are known to be fairly steep, the thinking being that people don't know a trend reversal is underway, and decide to buy weakness in the case of mature uptrends, or sell strength, in the case of mature downtrends.

Despite the good news, GOOG didn't make it above the 55 day moving average, and is at a good target to short on the daily at current levels, all other things being equal.

Yet, all other things are not equal. Google will see some buying pressure, that might take it as high as the 425 level, due to the inclusion in the index.

From my POV, that seems as good a bet as any. There was a significant divergence on the daily. But, GOOG would be a good short anywhere between the 400-425 level. I'd also be a seller on a breakdown of the March lows, even though don't normally like to play breakouts immediately.

Perhaps Google's addition to the index is what it finally takes to get this market to move down. My analysis of the charts seems to suggest GOOG wants to go down in the worst way, and the comming downtrend should be very sharp

Result: Google traded up as anticipated the projected resistance level around 425, and then gapped up on earnings to 450. Since that gap, GOOG has given up practically all of the gains it made since being added to the SP-500. A case of the right idea, but wrong timing.

4. AAPL: March 23, 2006
What happened to AAPL today??? It collapsed today. It is so far down it is looking oversold, and is due for a bounce, which may be a fairly sharp countertrend rally that could take this back to the 69-75 level (a 61% retrace of the decline).

I count a 5 waves down, and it appears today's move is the end of a 5 of 5 from both the January high, and the February high.

On the bearish side, this count is very bearish, implying the bull move in AAPL is over for the forseeable future.

Since this decline has a 5 wave structure, that means there is much further on the downside to go.

I'd need tomorrow for confirmation. A close above today's high would strengthen my conviction in this analysis. There is also a good chance that we won't know for sure until next week.

Tomorrow might see an open not too far from today's close, a sell off through the middle of the day, only to close toward the highs. If that happens with tomorrow being a high volume day, I'd be pretty confident the decline is done. That would be a hammer reversal, and would push the confirmation out until next week.


Result: AAPL staged a sharp rally to the 73.80 level, and has since given up the gains from the March/April lows.

5. HAL: 4/4/06
The monthly chart shows a negative momentum divergence, along with a potential Head and Shoulder top.

The near term appears bullish. Volume has been strong at each major price peak, so there doesn't seem to be a lack of interest at higher prices. It is probably safe to hold here, and set some above market sell targets higher than the $80 level. Although anything is possible, I don't expect a sell off until sometime in late summer.

HAL made a peak on April 21 at 83, and has since sold off from there. My error was not recognizing how close the top was.