Way back in January of this year I provided the model chart on RUSL shown below. It clearly recognized the recent $10 low as wave 3 down. I thus expected a retracement wave as shown and then one more down stroke into big black 5. This is just Elliott 101.
While it took longer to play out than expected, the similarity to the model is clear as you can see from the current snapshot below. Please, someone tell me if they have ever seen these kinds of calls made by Cramer or any talking head on CNBC before on the major turns because I have in fact not. At least not without it being as a result of an Elliott wave model. While EW is not a crystal ball, the fact that it can massively increase your odds of winning this game is clear demonstrated by comparing the model above to the actual below.
Now maybe this is all just lucky coincidence but there is no doubting that right now the shares are up 60% from where I publicly stated that I began trading them to the long side. While I was open to a few different short term potential outcomes, my model indicated that there was maybe 1-2 days left in the slaughter. And it's not like I have been calling bottoms on RUSL all the way down. There were 1 or maybe two checkpoints since the last peak that I indicated could possibly be early bounce points but they fell through very quickly and so I knew they were wrong. No folks, I have been following this thing down like a WW2 fighter pilot would follow down a damaged enemy plane. I saw splashdown and I was right there to capitalize on it all thanks to Ralph N. Elliott and his amazing odds enhancement system known as Elliott waves.
So where does the model say it likely goes next? In a word, UP. Do you see those hard inverted spikes (unicorn tails) labeled 3 and 5 or b? That is a multi-quarter inclining double bottom. It did not reach a lower low so it could be a failed 5th but that is not my primary count. My primary is that this was likely B of 4 in a flat correction. Flats are 3-3-5 in structure and so far we have gotten what I count as wave 3 bottoming in early 2015 and then a rising wedge for a or 1 (wedges count as 3s) and then WC2 or WCB on the 24th. "W" there means "wedge based" and wedges, again, count as 3s. Thus, off the bottom we have 3-3-?. My current model says that ?=5.
There are other options that are possible but are currently distant in the odds standing. Just so you know I'm not making those statements up as a catch all, There is such a thing as a leading diagonal. So 4 or a could possibly be 1 up, the recent falling wedge that could not make a lower low could be a deep vee wave 2 and now we would be working on 3 in that scenario. But 5th waves have been making lower lows of late and so the failed 5th idea just seems low odds to me.
Now, this could also be morphing into a HT 4th instead of a flat correction and I will be watching for that. But in those cases, the b wave is not usually so horizontal. Usually you get 15 degrees up for b. But it is not off the table yet by any means. It's just down in the 10% odds range. I model the flat correction as high odds.
Below is the standard prototype for the flat. Note that C is 5 waves and since it is a C, I expect them to occur quickly and with clarity for that is the general nature of Cs. While the model above has the C wave coming much further above A than in the model prototype below, I see a nice gap up there that is begging to be filled and conventional TA indicates that the target for a double bottom is 2 x the dome height of the A wave below. Still I want to caution people that the model above does not show the typical bounce, it shows nearly best case.
So, don't plan your exit based on price! Exit based on the wave count. The expectation is to see 5 clear and unambiguous waves up. If you see this happening even though the price is only ~$42, bail the heck out and then wait for the chart to tell you what the herd is going to do next. Again, it is wave count and not price levels that should be your guide. And folks, do bail out once you see 5 up because if that is 4 then 5 down is going to take this well sub $10. This is not a buy and hold. It has time value in it via the use of derivatives. This is not like ORIG or any ordinary stock.
In case you are interested, the wave labeled 4 or a in the model above is on the left below and that labeled b is on the right. You can clearly see that the left is higher than the right. These few cents are critical in the wave count above. Glossing over these details is why so many people on the web have bad counts.
OK, I have saved the best for last as a reward to people who actually read through this post, considered and understood the logic and did not suffer from that American epidemic known as short attention span.
If you have made it down here, give yourself a pat on the back because most of even my close friends, world class smart though they might be in their fields, have not demonstrated the attention span or interest in my blog to read many of my posts. I just had one of them tell me that EW was a bunch of bullshit this very evening even though he has not done any research into EW nor does he ever read my blog to check out my track record. It just goes to show, you can lead a herd to water but you cannot make it think.
I named this post as perhaps my most important RUSL post to date and that is because there is upside even higher than the model above shows. After 5 waves down, we expect a retracement which often takes us to the level of the prior 4th. Another common bounce point is the 38.2 fib. The heavy cyan line below highlights red 4 which was 4 of 3 down. In other words, it is the level of the prior 4th. Note how conveniently the wave before red 4 ended with a falling wedge which is why it was labeled w3 due to CWT. It's just more evidence to indicate red 4 is actually red 4.
OK, so did you also notice how the Cyan line is at almost exactly the 38.2 fib? That confluence is a wave attraction; the wave is attracted to it. So those 5 waves up might actually lead to nearly a 6 bagger for those who began trading this to the long side with me. If that happens it will be the biggest % gain call for RUSL shares since I began following RUSL in mid December 2014.
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