CROX and GLD: Two Wolfe Waves

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From March 12 re: CROX:

"If this ISN'T a Bullish Wolfe Wave, stop a long trade out if Friday's 18.08 low gets taken down."

18.08 got taken down in CROX, so I was stopped out for a loss. It's showing bullish divergences here in the MACD and the RSI's and likely will rally some on a "Double Fakeout" like GLD, but I'm always skeptical about bullish divergences with lousy price action (breaking below the lower trendline of the "possible" Bullish Wolfe Wave), so I'll leave it alone.

From March 2 re: GLD:

" The GLD opened at the top trendline. I shorted it just above there and covered when GLD rallied off 96.80. Possible Bullish Falling Wedge that might lead to a retest of the morning highs, so I took the money."

GLD was looking strong, and I suspected another push to the upside, which we got on March 5. That still looked strong with the POG rallying hard, so I let it alone, and didn't short it. The second upside "fakeout" didn't occur until March 17, then GLD finally came down hard. Tricky little devil. That's the hallmark of a Wolfe Wave. Fakes you out, and it sure did. I didn't play it, dang it.

CROX - Possible Bullish Wolfe Wave

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Interesting chart (back-to-back Wolfe Waves), and a very interesting development in CROX yesterday: a possible bullish reversal in the Bullish Wolfe Wave (pattern in green), after a Wave 5 fakeout to the downside last Friday, March 7 (as the chart stands...Friday's low could get taken out).

Wolfe Waves, basically, are fancy Bearish Rising Wedges and Bullish Falling Wedges. The difference is that there is a strong rally or decline, or "Lead-In," then the formation of the five Waves. The KEY to the pattern is the Wave 5 "fakeout" because it puts the proverbial "everyone" wrong-footed in the trade. At the Wave 5 Halloween high (Red #5), CROX penetrated the top of the pattern, looking like it was going to break out to the upside. Shorts had been getting dragged higher and had to "buy to cover" their shorts, and more longs were coming into the stock on the lengthy rally. "Everyone" (not literally) was a buyer, and they all got caught "wrong-footed" on one side of the market. We can see what resulted from that.

In the current time-frame, CROX broke the Bullish Wolfe Wave (or Bullish Falling Wedge, if you will) to the downside last Friday, looking like it was going into freefall and like it might become a "falling knife." We aren't supposed to buy those "falling knives," but that's the "fakeout" or deceptive quality of a Bullish Wolfe Wave. Longs tend to capitulate on the breakdown at exactly the WRONG time, and new shorts come into the stock on the technical breakdown and find out that was the wrong play, as well. In contrast to the Halloween high, in this case, "everyone" trading (not investors) is caught wrong-footed on one side of the market by selling, and by selling short.

If this ISN'T a Bullish Wolfe Wave, stop a long trade out if Friday's 18.08 low gets taken down. If CROX only gets back to the top of the pattern and/or fills the earnings gap at 31.68, that's a very nice gain from here (50%-ish). If it IS a Bullish Wolfe and CROX gets anywhere near the target line at Wave 6, that's an excellent gain from here (close to 100%). Good risk:reward trade (excepting any nasty gap down, which always is a risk in any stock). Downside risk from here would be about 13%, so roughly a 1:4 risk:reward on a play for the top of the Bullish Wolfe Wave. The risk:reward would improve if CROX is bought on a pullback.

XING & QXM

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We discussed late last year, the significance of the validated up trendline in the Monthly Chart. We can connect any two highs or lows and call that a trendline, but we don't know if that trendline has any importance unless the market tests it and finds support or resistance there. We can see that in August and September, 2007, XING did find support at the up trendline (that became a validated trendline), double-bottomed in the daily chart, and took off for a re-test of the neckline of broken 10-Month H&S Top. That was a Bear Market rally (quick, and a nice percentage gain). XING failed to get back above the broken trendline, other than the two "Gaps To Crap." Those failures at the broken neckline validated it as resistance.

XING then broke the validated up trendline in the Monthly chart, tried to put in a Bullish Inverse H&S in the daily chart in January, 2008, but that failed, and XING broke decisively to the downside, and has continued down. Eyeballing the Monthly chart, since the up trendline support has broken, where might we look for next support?

Possible Support #1: 5.50 - the January, 2008 low

Possible Support #2: 4.95-5.06 - the mid-to-late 2005 lows were 5.00...5.00...5.02...5.06. In the daily chart, the failed Inverse H&S target that is IN PLAY is 4.95, "suggesting" a test of that 5.00-5.06 horizontal support area.

As far as QXM is concerned, on March 4 we knew...

"That close below the wedge "could be" a downside fakeout, but I don't like to guess, and I don't like to be long a trendline break like that, so I'll continue to watch QXM and see what develops."

We got a rally back inside the wedge on March 5, but then confirmation of the breakdown on March 6 and more downside follow/thru on March 7, closing at new lows. It's inadvisable to "catch a falling knife." Better to wait and let it bottom.

SPX

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We got a Bearish Wolfe Wave/Bearish Rising Wedge rally in the SPX this morning, but in the daily chart, we've had a breakdown of the Symmetrical Triangle (in blue) and a failed re-test of the breakdown on Wednesday. The bottom of the pattern came in at 1348. This high on the day was 1344, so we've got a confirmed pattern failure, as the chart stands.

SOLF: Parabolic Rally...Parabolic Return

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"Based on the current BID...ASK, the November, 2007 gap target of 11.98 will get MADE at the open. SOLF now is down 70% from its January 3, 2008 high. The Ascending Triangle target of 10.99 still is IN PLAY, but "take at least 'some' profits when targets get MADE (11.98)."

The Ascending Triangle target of 10.99 just MADE. Nice ride down from the high 30's in early January. Over 70%.

QXM And XING

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Chart #1 is QXM, back when we discussed last October how it was a "Perfect 10." Patterns within patterns can be very explosive when they breakout. We can see that when the Right Shoulder completed on the successful re-test of the top of the Ascending Triangle near $9.00 on October 4, QXM rocketed to the pattern target of 14.59, and beyond, in only a few days.

Chart #2 is QXM in the current time-frame, and we can see again the "patterns within patterns. " It's a nice 3 1/2 month base. The top of the dominant wedge pattern (in purple) was validated on February 4 (at purple #5), within a penny, so a break above that trendline "should be" significant, if QXM can rally. In the current selloff, we would like to have seen the bottom rail of the wedge pattern hold and get validated as support on any re-test. Yesterday, QXM closed 3 1/2 cents below it, but it closed above the down-sloping channel in green. That close below the wedge "could be" a downside fakeout, but I don't like to guess, and I don't like to be long a trendline break like that, so I'll continue to watch QXM and see what develops.

Chart #3 is XING. After the failed Double Bottom and the failed Bullish Inverse H&S possibilities in the $7's, XING sank to $5.50. Bear market rallies are notoriously sharp and can have very nice gains. XING had a quick 40% Bearish Rising Wedge rally (the pattern in red) that ended at 7.79, at the declining 50DMA and right at the failed Double Bottom zone: the 7.65 September low, and the 7.81 November low. "Former support 'should be' resistance on any rally." It was.

Since that February 5 failure at 7.65-7.81 failed Double Bottom resistance, XING has been ratcheting its way lower. "Lower highs....lower lows."

DRYS - Double Top Target MADE

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The Double Top target of 68.70 got MADE today. Played it for a quick trade. DRYS now is attempting to get back above the 50/200 DMAs, in the 71's.

AAPL & GLD

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I made a stab at a retest of 123.05-123.54 support in AAPL. I didn't like the selloff to the low 122's after I bought, so I sold into the next rally which ended at 123.49, just below 123.54. That was the top of what "should have been" support. It became at least short-term resistance this morning. That's the number AAPL needs at the close for the Bullish Falling Wedge breakout to hold.

The GLD opened at the top trendline. I shorted it just above there and covered when GLD rallied off 96.80. Possible Bullish Falling Wedge that might lead to a retest of the morning highs, so I took the money.

SMSI- Descending Triangle

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"The Symmetrical Triangle target of 5.79 from the October 12, 2007 Symmetrical Triangle breakdown got MADE yesterday. The Descending Triangle target of 5.09 still is IN PLAY. "

The Descending Triangle target of 5.09 MADE in Friday's trading.