Several things stand out on the above weekly chart. First, notice the strong bullish engulfing candle on near-record volume. This alone probably indicates that a low has been made at least on the short term (days to weeks). Second, MACD divergence is confirmed as it is starting to curl up once again, which is very bullish considering it is occuring on the weekly time frame. Finally, the Elliot Wave count shows 5-waves, which means an upward correction is in the cards. I mentioned this fact in my last post about Citigroup, but at the time, there were no reversal signs (MACD, candle pattern, etc.) to confirm the wave's end.
I based my short term decision to sell on the the hourly chart above. Notice the 45% rally from $14.00 occured in 5-waves. At a minimum, this implies another 5-wave rally following an iminent correction. My plan is to buy this Wave 2/B correction, and once price breaks above the Wave 1/A high, I will set my stop below that price level. In this scenario, if all we get out of the rally from $14.00 is an ABC, I lock in a profit. If financials really hit their longer-term bottom, I can ride out the rally without closing my position prematurely.
I am targeting the $17.25-17.50 zone as the 50% fib and Wave-iv lie in this range. My stop would be below $14.