Lets revisit the trading pattern that we anticipated in MetroPCS a few weeks ago.
We first analyzed the trading action to be forming a triangle and projected trading to reach a final retracement of 6.27 before moving higher.
We can see on the chart provided below that from our initial analysis of PCS on March 2, 2010, PCS has captured the move higher anticipated. But, it is the trading action that occurred between the low of 5.99, our March 2 projection and the low of 6.29 on March 4th that is worth calling out. This particular trading range is what has set up the move higher and the price points projected in the intermediate future will are based upon the March 4th 2010 low.
The previous diagram and analysis used on PCS can be found in this post link.
- The yellow line in the current diagram below represents the point of our previous trading analysis.
- The blue line was the anticipated triangle correction. Remember that time frame for this trading range was not relative to the drawn trend lines as previously stated. After studying the trading action in PCS it becomes apparent that the triangle formed very rapidly due to volatility.
- The green line represents the price point at which our wave 4 correction ends and the wave 5 begins.
By looking at the price points called out in the diagram below, we can see that the anticipated price points were not met exactly but the form of the trading pattern from our projection followed exactly. In fact, our wave 5 price zero point, or the point at which wave 5 begins, was only off by two cents.
Because of the volatility in the trading of PCS during this time frame the triangle was very hard to trade or anticipate. Although recognizing the pattern was evident in real time, it was only after the stock traded to our exact wave b price point of 6.46 (outlined in pink square) and then traded higher without satisfying the triangle parameters (at the open of March 8th 2010) that we were able to decisively call 6.29 the bottom of wave 4.
If we use these trading analysis and the analysis of larger trading time frames, intermediately we can determine that PCS is trading in a profit taking range right now between 6.81 and 7.43.
On a longer term trading time frame, the current 7.06 would be a normal performing wave 3 high, in which this level becoming a turning point would develop a correction to 6.47 trading price point. Many traders that bought this stock at 5.52 will be taking some profits here.
Also at this point, wave 3 of wave 5 of wave 3 could be underperforming. Stalling out here at just over 7.00. We have tested the 6.80 wave 1 high. We could trade towards the higher end of the intermediate parent wave three range, 7.43, before testing 6.80 again. Immediately, the 6.80 price level is the swing point.
Subsequently, a move towards 8.00-8.15 should ensue. PCS will trade within one of the two relative performances. Either over performing over the short term and perhaps driving directly to the 8.00 range, or normal performance and longer term momentum will drive prices first lower.
Regardless of the path of price motion that PCS decides to take, the 6.47 price point could be an important support level on both long and short term trading charts.
