|AME Weekly Chart|
Wave-III on the weekly was a two-year pattern that was more than double the price movement of Wave-I. This eliminates any physical restrictions on the height of Wave-5 should it truly be in progress. We'll know for sure if price closes - and remains - above the resistance line formed by Wave-II and several subsequent tests of that peak.
The breakout started with a bang, driving the second highest weekly volume on the chart. It's easy to see that virtually all of the volume to date implies strong demand, and that bodes very well for the subsequent impulse wave. Volume has, indeed, declined since the twin spikes, however that decline merely brings us back to the 200 period volume moving average. Overall, it's a bullish signal.
|AME Daily Chart|
Now, it's obvious that we missed the prime entry point which came on the retest of the triangle (which is now positioned as a support line.) That doesn't, however, mean that another trade setup is not about to appear. Notice that we've traced five full sub-waves since the November low. Well, we've almost traced them. Wave-v is still in flight, and while its minimum target has been met, there's nothing preventing it from running further before a corrective wave kicks in.
Based on the length of Wave-III, we expect Wave-V to run at least 21-points, and given the length of Wave-III, it can certainly run further than that. Based on this, there are two entry points for which we will patiently wait.
- Wave-v thus far continues to include candles that touch the lower support line. That's the first possible entry. If we get a one-candle pullback to support, we'll enter long on a bullish reversal candle. The stop will be just below the lower support line, and we'll ride the remainder of Wave-v.
- The preferred entry at this point, however, will follow a short sub-wave a-b-c correction. Wave-v - once it completes - will likely signal the end of Wave-1. Once that happens, we'll wait for Wave-2 to run its course and then attempt to catch the start of Wave-3. That wave should be at least a 10-point run, so our patience will prove quite rewarding if we catch it in time.
Be patient, wait for the right entry point, and be wary of the earnings date. If we play this one right, however, it could prove quite lucrative.