7/03/2008

CNEH update

I last posted about CNEH here. Since then, it has played out roughly as I was expecting. However, I now think Wave5 is complete (which finishes Wave-I from $1.61). I would not be surprised to see a Wave-II correction down to as low as $3.60 or so.

Because of the fundamental strength of this company, I expect its stock to rise much higher than current levels, but on the short term, a pullback seems warranted. You can see a clear 5-wave up move on the daily chart above. 5-wave moves are normally corrected before the next up move starts. Initially, I was open to the possibility of Wave5 extending sharply, but today's selloff to under $4.50 negates that possibility. The current symmetry in how long each wave took to unfold (19-20 days for Waves 1, 3, 5; 9 days for Waves 2, 4) also indicates the completion of Wave-I.

Today's decline caused MACD to curl back, and it has nearly formed bearish divergence. In addition, selling volume, even when the suspect 20,000-share trades are subtracted, was very high.

Wave-II is normally sharp and fast, and corrects 50% or more of Wave-I. There is little event risk over the next 2-3 weeks (the production report should be released near the end of July). Therefore, there will not be much holding back the recent selling pressure as weak holders are shaken out.

The Wave4 low is at $3.48 and the 50% retracement lies at $3.63 (also, the 38.2% fibo from the all-time low to $5.68 lies @ $3.57). This price region should act as good support, and I will look to buy/add around there.

2 comments:

5 Times More Website Traffic said...

Excellent analysis Narayana. I am really impressed with the quality, clarity and concise-ness of your reports. You were definitely right on in your last blog CNEH Short Term Top Possible, and I wish I had set a limit order at $3.60 for a thousand shares after reading it, and I would probably be $3000 ahead (but that's just useless 'shoulda, coulda, woulda' talk as you call it).

Dr Claude Windenberger

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