SKF: The "Shadow" Bullish Wolfe Wave

(Click On Charts To Enlarge)

From May 3 comments:

"The Bearish Case For Financials:

1. Where the Bullish case would fall apart is if we've got a False Breakout in the UYG and a False Breakdown in the SKF.

Chart #2 shows the possibility of a Bullish Wolfe Wave in the SKF, which would be bearish for financials since it is an ultrashort fund."

UPDATE: Chart #2 from May 2 now is Chart #1 above. The Wave #5 Fakeout that we discussed back then turned out to be the EXACT low for the move down in the SKF. Interesting how the patterns in the UYG and SKF have played out over the past two months.

While all four pattern targets in the UYG have MADE (see "UYG: The Three Bears: Final Chapter" post below) and it plunged 49% from its May 2 high, the SKF ended up rallying in what I would describe as a Bullish Wolfe Wave "shadow effect" in terms of the Target Line (#6). See Chart #2 above. First time I've ever seen that.

By creating a parallel line and anchoring it to the May 2 low, we can see that once it got going to the upside off the Wave #5 Fakeout low, it rallied even more sharply than the original Wave #6 target line, and has rallied a sizzling 84.2% in just two months time from the May 2 low to this week's high.

While this isn't a classic Bullish Wolfe Wave since the SKF hasn't hit the target line (#6), it sure helped with indentifying the direction. The rally was "late" in developing in terms of tracking the original target line, but it went up like a rocket and recently has put on the booster rockets, rallying well above the "shadow" target line.

That reminds me...Happy 4th of July ;)

TYPO: Chart #1 from May 3 should read "Possible Bullish Wolfe Wave," not Bearish.