Monday, April 7, 2014

Monday's Prospects: Round 2

The survivors of my first round of analysis have failed poorly in the second round. (See "Monday's Prospects".)

On the mid- and large-cap list, BBY failed confirmation, and VSAT has insufficient open interest for a bear play. On the small-cap list, both MACK and ERII have insufficient open interest for bear plays.

That leaves the Irish building materials company CRH Plc (CRH) as the sole surviving prospect, and a first look at the chart leads me to believe that its not a good bull play.

CRH is in the final stretches of a rise from June 2012. In Elliott wave nomenclature, I call it wave 5 {+2} within wave 3 {+3}. Once wave 5 {+2} is complete, then CRH will begin a downward correction of significant proportions.

The internals of wave 5 {+2} aren't a very clear count, as often happens with lower-volume symbols, so I haven't figured out how far along wave 5 {+2} is. But even without a precise count, the chart clearly shows that it is far progressed.

The chances are good that $30.06 was the end of wave 5 {+2} and the present bull signal is part of an A-wave sucker play. Therefore, I have no intention of opening a bull position in CRH and won't be doing a full analysis. I have no intention of trading any symbols off of Monday's prospects lists.

Click on chart to enlarge.
CRH 3 years 2-day bars (left), 1 year daily bars (right)


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.

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.

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 decisions for his or her own account, and take responsibility for the consequences.

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