Sunday, April 5, 2015

[WDC] update

Backlink.  Model from that link is below:

Current snapshot is below.  The red lines are the same wedge rails in the model above.  So to recap, we had a throwover of the top rail, a break down to the lower rail and the a bounce to kiss the upper rail from below and then break down of the lower rail.

Then, the chart actually back tested that lower rail from below and headed lower.  This so far appears to be a series of market moves and check to see if the move is fully agreed upon.  So all Hell must be about to break loose, right?  Isn't that what I wrote on the chart above?? 

Well, the correct thinking is that everything and I mean everything I write in reference to EW should have the word "likely" in it.  No matter how many times I write that herd tracking is about odds and not about certainties, some people cannot internalize it.  They want and somehow expect to find an all seeing oracle of future knowledge without considering how silly it is to expect such things from mortal man.

So, whether I take the time to write "likely" into each and every sentence I compose, please always insert that word mentally because there is no such thing as certainty when you are gambling.   Increased odds in a given outcome is all you can possibly hope for.

So why am I bothering to repeat all of this even though the chart seems to be following my model?  We mainly expect this kind of verbiage when something goes wrong, not when something goes "right".  

The reason here is that we are dealing with a wedge and wedges have the propensity to extend and if that is going to happen this time, it should happen soon.  This extension, should it occur would likely look something like the blue rails in the model above.

Zooming in shows why now is likely the critical moment for committing to a collapse or extending the wedge for another move up. 

So here is how to read this model.  The green path will either happen almost immediately or it will be eliminated as a possibility.  The current price is $93 and a move above 93.30 likely kills the super bearish green path.  That amount of change is so small and so trivial to observe that it effectively takes the challenge of discernment down to the blue or red options.  Said differently, if the green is going to happen it will happen so quickly that you won't have to think about it or ponder over it.  It will likely play out with a gap down early next week.

In the case of the blue path, it can either move up to the lower red circle and then bounce down or go back to the level of the prior 4th as shown. 

If the red path is being taken it will likely show us by breaking back up into the body of the wedge within the heavy red circle.

If the green path is to be taken then it will likely happen as part of a broader market sell off.  WDC will not likely be going down alone.

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