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Oz Stock Trading ReportClassic Elliott Wave Analysis of Alcyone Resources, Dec 12, 2011
Dec 12, 2011 © Harry P. Schlanger
The junior exploration company, Alcyone Resources was studied technically and found very amenable to Elliott Wave, Trend Line and Fibonacci Analysis.
Not all stocks are able to be analysed using Elliott Wave theory. Some stocks are more tractable than others if their wave structure
fits the theoretical wave model and is more easily recognised.
Alcyone Resources (AYN:AX), a silver and gold exploration mining stock, is such a stock.
Elliott Wave Analysis for AYN
The current daily wave scenario of Alcyone Resources is shown in Fig 1 below. The impulse Wave (1) ending on 9th May, 2011 consists of five subwaves labelled 1-2-3-4-5.
Subwave 5 has itself subdivided into five clear subwaves (not labelled), such that the highest price lies above the end of the movement, Wave (1).
The A-B-C correction is known by Elliott as a "Flat", owing to the reaction wave, Wave B, being at least 61.8% of the initial wave, Wave A, in the pattern .
Wave C consists of a terminal triangle, which has five subwaves, labelled i-ii-iii-iv-v (each subwave itself has three waves). The end of the
corrective movement is labelled Wave (2), which is assumed by the sudden strong blue candle - such an engulfing candle is a bullish signal marking a turning point
in the market. Moreover, the turning point occured exactly on the intersection of the rising trendline and Fibonacci 50% level.
Trend Lines and Fibonacci Support Levels
Fibonacci levels have been drawn from the beginning of the impulse wave that started on 15th July 2010,up to the top of Wave (1). It can be seen that the 50%
line has provided support for Wave A and terminal Wave C, which also formed the end of the corrective movement, Wave (2).
The lower trendline has been drawn as an extension of the 2-4 corrective endpoints and accurately passes through Wave (2).
Fibonacci Time and Price Ratios
It has been discovered that Waves A-B and Wave C are approximately in the ratio 3:5 in time, which is in effect 1.0:1.618. When ratios in both time and price are found
in addition to the wave movement falling on support lines, it gives much confidence to the analysis.
Daily Chart of Alcyone Resources (AYN)
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Fig. 1 Elliott Wave Analysis of Alcyone Resources: Dec 9, 2011
(click image to enlarge)
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Trading Alcyone Resources
For educational purposes only: The stock was observed for approximately two months and as price followed expectations, a 0.076 buy order was placed.
The order was taken and the market bottomed at 0.075 before reversal was observed. It remains to be seen whether the market will follow through on price.
AYN's analysis was considered "perfect", a classic, textbook analysis. This allowed to enter a trade with confidence, which registered a
profit immediately.
Since the lower trendline is intact, the next movement up is expected to be the bigger wave (3). A future article will report on the updated chart.
References:
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Introducing the Elliott Wave Principle: How Ralph Elliott's Stock Market Cycle Theory Came About
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Basic Tenets of the Elliott Wave Principle: Understanding Market Waves and Learning the Rules of Construction
The copyright of the article Oz Stock Trading Report: Classic Elliott Wave Analysis of Alcyone Resources, Dec 12, 2011 is owned by Harry P. Schlanger. Permission to republish in print or online must be granted by the author in writing.
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