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Oscillating around can also mean being thrown around. I would like to add a little more to the subject of the oscillator which I touched on last week. I noted my concern then about when the oscillator goes too far below zero. I happened across an example this week which illustrates the point and the risks associated with buying stocks when the oscillator goes too far below zero.
Let’s turn to REX a stock I had been watching several days ago and look at the chart as it was back on November 3:
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We saw a sharp fall in the oscillator and this was a signal to beware. Let’s look a few days forward:
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The stock fell 6% on November 25 – but the horse had already bolted – the oscillator was already out of control. Oscillators that fall so low are indicating the stock will struggle to recover.
Go one more day forward:
The stock at the time of writing had recovered the 6% but the Elliott count changed with this new data:
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Meaning the 6% recovery had now become maybe a dead cat bounce.
Not the stuff to dine out on but at the same time interesting formations.
Enjoy the ride
Tom Scollon
Chief Analyst
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