Thursday, April 2, 2015

[MCP] update which might be an omen for all commodities.

Here is the backlink to my first post ever on Molycorp.  It's kind of a long read but suffice it to say that I read that it issued a going concern notice and then noticed that the concern was for events which may or may not happen a year from now.  I also noted that it was in trouble because of the collapse in commodity prices and since I am predicting a very nice bounce in commodities into 2h 2015, I assumed that MCP could be positively affected.  For the first time ever I looked at their stock chart in the link above and I concluded several things:

1) that big bounce in Feb was A or 1.
2) the current decline that had nearly retraced the entire bounce was B or 2
3) MCP would likely have at least one more big bounce to at least $1.20 but could be much higher as in $1.50 or more.  Worst case.  Best case this would be part of a much larger motive move up.
4) as you can see from below, I was modeling a dip to around 30 cents. 

With that setup, I decided to watch it and the chart below was formed shortly thereafter.  Because of my proprietary w3 guideline along with a 3 wave bounce to the level of the prior 4th, I decided that there was going to be one more wave down as shown.  Again, price target of .30

I set limit buy to .28 just to see if I could catch a momentary dip. The chart below is what transpired since.  The actual bottom was around .31.  By the time I checked it that day it had double bottomed in a tight pattern and then had begun to move up.  So I put in a market buy which got filled at .36.

What is interesting about this are two details that lead to the top level care point:
1) it did dip again after red 4.  Without wx guideline I would have counted the bottom as being in on the 19th and I think most EWers would have done the same.
2) while it did go 5 waves down to a lower low than W3, it failed to go to a lower low than the January low.

1+2 lead to the top level care point which is that my high level model for these share is likely correct.  I mean, what are the chances of the share price falling right when I expected it to, down to around the level that I expected it to fall, and most importantly, no lower than the low of January? 

Most people would say "impossible to call it to that level of detail in advance" and I would agree with them that, without benefit of EW, the chances of getting a call like that using just gut feel approach zero.  So the fact that it happened as modeled suggests that it should be safe to add to my position on the first big % dip which follows 5 waves up.  Doing so will greatly reduce the risk in playing these shares which everyone considers to be toxic wastes right now because of the going concern notice.  If my top level count is correct then the bounce could actually be to $6 (the level of the prior 4th).  Time will tell.

No comments:

Twitter Delicious Facebook Digg Stumbleupon Favorites More