Lets begin with a chart dating back to April 1979. Don't ask me to label it because I am clueless BUT I can say the following:
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From the March 1985 low price has been moving inside a channel with higher lows / highs therefore the trend is up.
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From the April 08 Double Top at 1.6039 down side action looks corrective but we only have a 5 -wave overlapping sequence down leg therefore it is unlikely that the pullback off the April 2008 top is over hence the trend is down.
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Probably it is only a casual observation but we could have a "dejá vu" pattern seen in the price sequence during the March 1985 low - September 1992 high - October 2000 low, I am referring to a potential Head & Shoulder, which, if it plays out again it would carry the price towards the rising trend line support in force since the March 1985 lows. But a large rebound off the July lows is needed in order to shape the right shoulder.
Lets move one. In the next chart I have labeled a potential count for the corrective move off the 2008 Double Top. It is a Double Zig Zag.
It is not a "fluke" that price might be attempting to establish an important bottom at the July lows since we have the mentioned neckline that connects the Nov 2005 low + May 2010 low.
In addition we also have the 200 m MA.
If the wave (A) of the second Zig Zag is in place at the July low then it is reasonable to expect that price will achieve a Fibonacci retracement of the down leg off the May 2011 lower high.
If price is shaping the right shoulder then the current up leg should reach the 1.37 area.
If price achieves a monthly close above the 10 m MA which stands at 1.2855 and it also coincides with a horizontal support then the odds that price is involved in a multi month rebound would substantially increase.
In the next weekly chart I have labeled from the April 2008 top the mentioned Double Zig Zag sequence, in addition we can make the case that at the July low price a completed the wave (A) of the second Zig Zag (with a DZZ).
Again since the move off the May 2011 is clearly corrective we already know that we don't have a major bottom but if the current up leg belongs to the wave (B) of the second Zig Zag then price could aim to reach at least the last lower high at 1.3486 or even the trend line resistance.
The Alt count would call for a Triple Zig Zag off the May 2011 in which case the current rebound is only a wave (x) hence the current bounce will be short lived.
In the next weekly chart I have added more information, which is suggesting that price, is attempting to accomplish a large rebound:
- A trend line off the March 2011 has been breached
- Price has recovered above the 20 w MA
The next resistance is at a weekly gap = 1.2919
If this gap is closed then the odds of being a wave (B) will substantially increase opening the door to the Fibonacci retracements.
The major resistance above the weekly gap is located in the 1.3490 area (last lower high + 100 w MA + 0.5 retracement)
In addition to the Double Zig Zag option, since price has not breached the June 2010 low, price could be forming a potential bearish Triangle wave (B). (I began suggesting this EWP on March 12).
If this were the correct pattern then price would extend the current rebound unfolding the wave (E) with a potential target in the range of the two trend lines.
Weekly momentum is suggesting that price has established an important bottom:
- RSI has a positive divergence at the July low + it has substantially breached the trend line resistance in force since the May 2011 high.
- MACD has a positive divergence at the July low + it has issued a buy signal.
- As long as the bullish cross of the Stochastic is not cancelled the trend off the July low remains up.
