Reviewing NEP’s chart today, I remembered a very important chart principle regarding triangles. NEP just broke out of a triangle, and I believe this thrust will be terminal and should end within the next 1-5 days.
Here are the relevant principles regarding triangle formations from Elliot Wave Theory by Robert Prechter:
A triangle always occurs in a position prior to the final actionary wave in the pattern of one larger degree, i.e., as wave four in an impulse…
On the basis of our experience with triangles…we propose that often the time at which the boundary lines of a contracting triangle reach an apex coincides with a turning point in the market.
(note: bold emphasis added)
Now let’s look at NEP’s chart to see where we stand. The first chart was taken from a post written several days ago and shows that NEP definitely did break out of a triangle formation. And as you can see from the labeling, this is likely a 4th wave triangle. Thus odds suggest that this recent rally is terminal in nature.
The second chart below shows the detail of the triangle and subsequent breakout. I have highlighted the apex of the boundary lines of the triangle, and you can see that this point in time will be reached within a few days. As the quote mentions, the market will often reverse at this point in time.
Therefore, given the excessive bullish sentiment currently surrounding this stock, the parabolic nature of the rally, and the Elliot Wave principles, I am inclined to believe that the stock will begin a reversal within the next few days. Good luck to all!