Sunday, February 16, 2014

CCI: Yet Another Triangle

Crown Castle Corp. (CCI) broke above its 20-day price channel on Friday. I'm writing this analysis prior to confirmation, which will occur if CCI trades above the breakout level, $75, again on Tuesday, after the Presidents Day holiday.

I intend to deal with this symbol quickly, without a full analysis, because I have no intention of opening a bull position; the chart's argument against doing so is quite clear.

CCI, you see, is Yet Another Triangle.

The Chart

Elliott wave analysis puts CCI in the midst of a symmetrical triangle since May 14, 2013, when it peaked at $81.16. Since then the price has been bouncing its way between the rather ill-fitting boundaries of the triangle as it works through its five extreme reversals, "a" through "e".

I seem to be running into a lot of triangles lately, a sign I would interpret as meaning that the market has lost the consensus that fueled the run up from October 2011.

A century ago this year World War I began, initiating a struggle that on its western front was a protracted stalemate of trench warfare.

Triangles are produced by much the same mechanism, a conflict between bids and asks where neither side has the strength to impose a trend; each wins its battles but the war goes on.

Click on chart to enlarge.
CCI 20 years monthly bars (left), one year daily bars (right)
The way I've drawn the triangle's  trend lines frames the price movement so that the first four reversals have already occurred, with one more to go before wave 3 {+4} makes its final push, wave 5 {+3}, to the upside.

CCI's price is at the "d" reversal point. Its next step, according to Elliott wave doctrine, is a reversal to the downside to its "e" reversal point, which may turn out to be around the $69 level, although there's no way to say for sure.

I shall note that the trend lines were a difficult frame to fit on the reality of the chart. So perhaps this is the "d" reversal, and perhaps "b".

In either case, Friday's bull signal is a clear whipsaw and head fake in the making, the sort of set up I try to avoid like the plague.

Decision for My Account

And avoid it I will. I won't be opening a bull position in CCI.


My shorter-term trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

I use the number 68.2% in using applied volatility to calculate the expected trading range. This comes from statistics and refers to the one standard deviation boundaries, which are expected to contain 68.2% of whatever is being studied. Putting it another way, given an item (a trade or whatever), there is a 68.2% chance that it will appear within those boundaries.

Elliott wave analysis tracks patterns in price movements. The principal practitioner of Elliott wave analysis is Robert Prechter at Elliott Wave International. His book, Elliott Wave Principle, is a must-read for people interested in this form of analysis, as is his most recent publication, Visual Guide to Elliott Wave Trading

Several web sites summarize Elliott wave theory, among them, Investopedia, StockCharts and Wikipedia.

See my post "Chart Analysis: Nomenclature" for an explanation of my method for labeling waves on the chart.

By preference I place my trades in the last half hour before the closing bell in New York. See my essay "When is the best time to trade" for a discussion of the practice.

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

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