January Commentary

I always like to come back on a chart a month after we have discussed it. Biomira was displayed with price projections based on an uptrend. Price has continued its ascent as expected and today it even penetrated the resistance level of the previous peak. When you look at 12 months of daily data, you can see how Elliott wave relates to the market, its weaknesses and its strengths. Up to the middle of the chart, it was a clean pattern of 5 waves uptrend, so far nothing unusual. Then suddenly, price collapses on the rumour of a possible sale. An ABC pattern follows exactly as described by Elliott almost a century ago. While many may be surprised that Elliott's theory describes accurately the market moves, we should not forget that it is based on observation of the market as a macro economic model. So the fundamental rules are not only a question of probability, but one of human behaviour within a conditioned environment. Continuing our description of the fit between Elliott's model and the market, we see that the price consolidates for a certain period where the trend is not neutral but sideways. During that period, the waves move in a sort of contracting triangle and the real question is when will the price resume a trending pattern.

Click on the image to enlarge.

The when is the moment when price will cross one of the sides of the triangle. The direction is usually the same as the price entered into the pattern. In this case, the price crossed already the blue line that is the upper side of the triangle connecting the peak with the green circled one or A to the peak with the red roman ii, extended to the right. A new trend is emerging but it will be tested. The first test was the clearing of the peak at ii, the second and more difficult is moving above the thick red line. AlphOmega gave an entry signal at $1.50 and the closing today was $1.71. a 14% gain. Our expectation is price making it to about $2.00, then follows a corrective wave and another bullish impulse. While all may not turn out exactly like this, we have several markers that will alert us of a break in the trend or a weakness or the continuation. It would be false to pretend that we know what is going to happen, instead we map our expectations and exit when they are not met. While we cannot control the market, we can control our investment; it is an active way of trading rather than a passive way where we would wait for the price action.