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In fact, an old favourite – BHP? Not for me.
You may think I am teasing you because I don’t punt. Maybe I am teasing but not in an idle way. Because it is in times like these that many do punt. They feel resources are rallying they have missed the boat.
Be brave. Stick to your disciplines.
There is no new long-term trend developing. We are seeing a small rally after some deep falls but it is all in the context of range trading. More about the overall market another time but for now let’s focus on BHP. And so to the charts:
click to enlarge
click to enlarge
click to enlarge
Note the detail in the top left hand corners – the time periods daily and weekly. Let me take you through the salient points. First the daily: some people thought that the bottom was the wave five low back in mid-July. Maybe, maybe not.
On the weekly chart I have shown all wave fives. (This is not on my standard template so you don’t often see these on my usual charts). They are implied – that is, there are (in theory) always three wave fives. So even though they are not on my template charts - as I like to keep my charts simple – I can always ‘see’ them.
I will repeat my explanation on the ‘three’. The first wave five (and this applies to all Elliott waves) is maybe not the last but the probability that the first wave five will be met is very high. The probability that a second wave five will be met is not so high, let’s say it’s about 20%. The probability of a third wave five is, in my experience, very low. Maybe less than 10%. But it can happen.
There are Elliott theorists – pure theorists – who will argue the point and they might be right. But I use Elliott for trading and I am not really interested in the deep theory.
I give BHP a good chance of reaching the second wave five low and when I look at a 30-week chart – just for fun – it confirms BHP at $28.
Worth a punt? We will have to wait and see.
Enjoy the ride
Tom Scollon
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