Let's start with the broad view and take a look at the monthly chart.
|AFL Monthly Chart|
|AFL Weekly Chart|
Notice that the weekly chart formed an ascending triangle pattern with price currently resting on the hypotenuse (support) of that triangle. This line is also just above a horizontal support line that pivoted from resistance off the Wave-i peak in October 2013. That support line was tested at least four times and price bounced off it on each occasion. From an intermediate (weekly) to long-term (monthly) perspective, the signals are looking strong for a bullish impulse.
|AFL Daily Chart|
The volume pattern at the second bottom - which is an eve bottom - strongly suggests climactic selling. One relationship we always compare is the range of the price bar compared to the size of the volume bar. We can see significant supply pushing the price to that second volume, but then we have an extremely narrow range bar on extremely high volume. Supply is being exhausted. Then we have a hammer pattern on 9 December with the second highest volume bar of the year. That was a sign that major demand entered the scene as priced reached the bottom support line.
What stands out in the short term is the rising volume we're starting to experience while price continues to trade horizontally. A narrow channel formed starting with a long wick on 14 December, and this pattern now appears to be a coiled spring ready to explode in either direction. The green support area forms a descending triangle when paired with the diagonal resistance line shown in purple, so price truly could break in either direction. The Elliott Wave counts show a higher probability that the break will be to the upside, but it's always important to remember that this only shows us probabilities, not certainties.
We intend to play this current setup to the long side. What we are looking for is a strong bullish candle that closes above the horizontal channel resistance line on confirming volume. Our stop will be just below the lower green support line. A break of that line not only invalidates our entry, but it also invalidates the Elliott Wave count on the weekly and monthly charts. So if we break that barrier, we definitely need to exit and reassess the pattern.
Because this is a Wave (iii) of iii of 3, we're not going to set a fixed price target. Rather, we'll want to ride this one as long as we can, gradually moving our protective stops up as each of the sub-waves form. We'll only want to be stopped out of this one when Wave-4 finally forms. The Elliott Wave targets, both for the primary wave and the sub-waves, show a minimum target of $87.70 which will be a nice 17-point move from our current position. Compared to the 3.50 point risk we're assuming with our protective stop, that's a solid 4.85:1 reward to risk ratio. We'll take that trade.