The pattern I’ve been watching which occurs time and time again when a stock is in a Wave C downtrend and reaches level of 50% of its All Time High, which is the strongest of all the Fib and Gann support/Resistance levels.
Stocks tends to bounce off the 50% ATH level on the weekly a few times before breaking through. On the Monthly this looks like pressure building up, so that when it breaks it does so with strong momentum downwards. For BHP the level was $22.65.
The stock will make a clear break from the ATH50% level. There is little consistency as to where it turns so you have to figure that out separately or wait for the turn to confirm using other techniques. For BHP if you look at the $17.30 level of my chart below. This is at 38.2% of the ATH, another reasonable support level; there was a little peak and correction there on the left side of the chart on the way up; its also just below the fall into Wave A so seemed to influence. So this seems a strong level for BHP and there not much around it as obvious alternative levels. I don’t normally use the daily chart but when it fell through %17.30 today and reversed, i.e. this level influenced, it’s was hard not to take a long position as the likely turn forming. May still get some volatility above and below let’s see if it can find it’s support here.
Once a stock falls through ATH50% it will typically retrace to that level before falling to 75% (marked as 25% on my chart). I don’t know the rate of increase back up, but I’ve just used a rate in Pink taken from the left side of the chart. It intersects the current Orange downtrend line just below the ATH50% level so seems reasonable: say $22.10 in July 2016.
BHP should then turn down to the 75% level at $11.30 to complete the pattern. This would also neatly coincide with 5 subwaves down for Wave C. $11.30 has some natural support here, so all makes sense. Note that there is actually much stronger support down at $7.50 but its hard to imagine today it getting down there, but keep it in mind.
Timing. Not my best work but to put some markers out. The current orange downtrend line intersects the 75% (25%) level at Jan 2018. The price trend should follow this, but the actually SP will fall a bit earlier or later. I prefer the Gann Box timing. I’ve been told in the past that BHP has a repeating major low about every 5 years. This Gann Box and the dates marked seem to pick this up fairly well and suggest October 2017.
So as a road map only, look for turn at $17.30; run back up to say $22.10 in July 2016 and then fall to $11.30 in about October 2017.
I was going to put up a few chart examples of where this pattern has happened before, but I’m getting lazy, so just put up a couple I’ve posted before that somewhat reflect the pattern.
MND built up pressure above then fell through ATH50%, reversed up but hit the downtrend line short of it, then fell to 75%.
MKB chart below from 7th Sept 2015, even as a spec tech stock as different from a BHP type company as you can get, fell through 50% (note when in Wave C) retraced and although not shown as this was posted ahead of time, eventually reached the 75% level (and in fact fell down to the 16.7% level beyond at 5 cents. Refer my comments on this possibility above for BHP!)
Sims Metal Management SGM also showed the same pattern at ATH50% when in Wave C. Note that pink line is not the down trend line, which is not shown.
(20min delay)
