Palladium Stock (SWC) May Lose its Shine

Metals have been on a tear in the past month, and it almost seems like they might never drop. Mining stocks have enjoyed the benefits of these outrageous prices. Take, for example, Stillwater Mining (SWC), which specializes in extracting Palladium and Platinum. It has enjoyed an almost 300% gain in just about 5 weeks, though it has yet to earn a profit. I think it is on the verge of a decent correction very soon.

On the chart above, you can see a clear 5-wave up move from the $7.42 low. My measured targets were in the $19.50-20.25 range. Since these levels have been breached, I am getting ready for a sharp decline to about $14, the 50% fibo level and the Wave4 low.


I think we will see another trend low in the Q's over the next month.

In the screenshot above, you can see 4 waves down from the $55 top on Halloween '07. Wave4 has formed as a triangle and price is on the verge of breaking out to the downside. A measured target is between $39.50 and $40.25, where Wave5 would equal Wave1.

After this dip, MACD-divergence may form, which would precede a nice rally into the summer. I might consider some tech names if the Q's drop as I am anticipating.


EUR/USD Long Trade (Update)

Update of trade from 2/24/08, @ 8:44am CST on 2/27/08:

I closed out the long trade a few minutes ago for +193 pips profit @ 1.5083. I was probably jumping the gun a little bit, but I feel like the pair has gone up too far, too fast.

Retail traders went long on the break of 1.5000, which is not what I wanted to see. Also, an upside target for a triangle breakout is sometimes equal to WaveE + [triangle height]. This would be at 1.5094. So far, price has hit 1.5105. Finally, there is 5-waves up from 1.4776 along with MACD- and RSI-divergence.

I may look to get back in later depending on whether price corrects in 3-waves or not. Either way, I will try to be patient, because I have found that making trades immediately after a nice gain usually ends up in losses.


EUR/USD Long Trade (update)

Update of trade from 2/24/08, @ 3:51pm CST:

This morning, the market dropped to 1.4776, 1 pip above my entry order, and then proceeded to rally 200 pips. I was very happy to see this when I checked the market when I woke up; Oh well.

Regardless, I bought at 1.4890 with a stop below the Wavei of Wave3 top at 1.4862. My plan is to move the stop to 1.4899 for now. If price reaches 1.5075, I will move the stop to 1.4935. I will look for an exit point as the waves unfold further.

Today, retail speculators shorted even more on the rise. Only 30% of traders are now long EUR/USD. This increases my confidence in this rally.


EUR/USD Long Entry

I am going to take a long trade at 1.4775 with a stop at 1.4690.

My elliot wave analysis is fairly similar to before. It looks like Wave1 may have taken the form of a leading diagonal. Wave2 unfolded as a fairly standard 3-wave pattern, temporarily breaking the trendline of the diagonal. I now believe Wave3 is underway, and it appears that it may be subdividing.

My plan is to go long on a Waveii of Wave3 retracement. The weekly Pivot Point lies at 1.4767, as does the 38.2% retracement level. Also, should this retracement occur in 3-waves, WaveC would equal WaveA at 1.4771. Thus, my entry point is 1.4775. My stop will be below the 61.8% retracement at 1.4690.

My target is in the 1.5000-1.5500 zone. Should price reach 1.5075, I will move my stop to 1.4950. I will also be on the lookout for any high-volume downside moves, because I have an alternate Wave count that is potentially bearish.


EUR/USD Long Trade (update)

Update @ 9:24am CST: I am out for +18. I will look to get back in on a 3-wave retracement.

I was originally planning on staying in longer, but I was expecting a stronger move through the 78.6% fibo @ 1.4835. The market made three strong attempts and failed. Couple that with the MACD divergence and the clear 5-wave up pattern, and I think it's better to sit out for now.


EUR/USD Long Trade (update)

Update @ 6:52pm CST: I will place an order to go long @ 1.4800 with a stop @ 1.4750.

Wave1 seems to have occured as a diagonal in 5 overlapping waves. Wave3 should be in progress, with Waves(i,ii) complete. Because Waveiv cannot overlap Wavei, I will place my protective stop just below Wavei. This way, as long as I am right about the trend, I should not get stopped out.

I plan to buy on a Waveiv correction @ the 38.2% retracement (1.4785-90). At a minimum, I expect another high 1.4835 to complete the 5-wave cycle from 1.4620. Since Wavei in this chart is also at the same level as Wavei in the chart above, I feel confident in holding my stop below this level.

A lot of retailers went short (and closed longs) on today's breakout. There are nearly twice as many shorts as longs right now. I think this is a good sign that the uptrend has resumed and that EUR/USD will pop above 1.50.


EUR/USD Long Trade (update)

I have canceled my entry order to go long the EUR/USD. Today's action muddled the wave patterns, so I will wait and see how the chart unfolds. Lots of retailers went long today as the price dropped. They must be thinking the same thing as me (bullish), and I don't want to be following that crowd.


EUR/USD Long Trade

I am taking a long trade on the EUR/USD @ 1.4740, with a stop @ 1.4698. My target is the 1.50-1.55 zone. I plan to hold for a couple of weeks unless a clear 5-wave bullish pattern emerges.

On the 8hr chart, you can see that a nice triangle has formed over the past few months. Triangles usually break out in the direction of the previous trend. The rally from the WaveE low looks choppy, but much accumulation has taken place (i.e. up days on higher volume). Price is consolidating below the 61.8% retracement level of the decline from d to e.

On the 2hr chart, it looks like Wave1 of the ascent from 1.4438 is an overlapping 5-wave diagonal. Wave2 is a simple 3-wave correction. Now it looks like Wavei of Wave3 is starting. My plan is to trade a breakout into Waveiii of Wave3, with a stop below Wave1 (which ended at 1.4708).

The 15-min chart shows a nice 5-wave bullish sequence followed by 3-waves down. Ideally, I would place my entry above 1.4765, but to reduce risk, I will place an entry order to just above the descending trendline, at 1.4740.

Additional validation:
•The SSI index has grown more net short as price has risen. Retailers think the trend is down, but they are usually wrong.
•Commercial traders on the EUR are at a net-long extreme.


Crude Oil Outlook

Crude oil has had a very nice run since the beginning of 2007. The question on everyone's mind is probably "how much higher can it go?" I believe it has yet to peak in the next several weeks. Below is a chart of USO:

From an Elliot Wave perspective, there needs to be one more high to complete the 5-wave bullish cycle from $42.56 (Crude Oil price is roughy 1.25*USO). I think that we will see this high within a couple months (especially since we are heading out of winter into higher demand).

However, following this new high, there should be a multi-month correction. Oftentimes, Wave4 holds as support in these corrections. Therefore, I doubt we shall see prices below $65 (Crude $80) in the next 3-4 months.


EUR/USD short trade (update)

Update @ 11:47am CST of trade from 2/3/08:

Earlier this morning, my trade was closed for +310 pip profit. I will stay on the sidelines for now, but I will look to go long if price bounces off the supporting trendline of the triangle.

I think the safest plan will be to go long on a 3-wave correction of the bounce from the trendline.

EUR/USD short trade (update)

Update @ 10:02am CST of trade from 2/3/08:

I am setting my limit to close out the trade at or below 1.4480.

As you can see, a 5-wave sequence has unfolded from 1.4941. There is potential MACD divergence forming, which tells me that I should be getting out soon. I am choosing 1.4480 as my exit spot, because I believe there will be at least one more low below 1.4481 to complete Wavev of Wave5 on the chart. I may be missing a bit of profit because price could still test the lower trendline, but I like to exit when the trend is still in place.


EUR/USD short trade (update)

Update of trade from 2/3/08:

I am moving my stop to 5-points profit, @ 1.4785. Now, my worst case is a 5-point gain. I am looking to close the trade in the 1.4450 zone. If all goes well, I am then planning on getting long for a break above 1.5000


EUR/USD short trade

I am taking a short trade on the EUR/USD @ 1.4790, with a stop @ 1.4950. My target is the 1.4400-1.4500 zone.

Friday's reversal was interesting because it happened on poor employment data. This price action formed a nice bearish engulfing candle. As well, MACD divergence seems to be forming, which would indicate another drop in prices. Finally, it looks like a triangle is forming on the daily chart. There should be one more leg down to the lower trendline, and then a thrust through 1.50.

On the 2-hr chart, notice the strong MACD divergence. Also, notice how the rise from 1.4364 was choppy instead of in a clear 5-wave pattern. I think this means we have another decline to go before the bull trend resumes in full.