MPEL is showing an interesting chart right now. The technical analysis using Elliott Waves has been dead on from the 3.26 low, to the 5.68 high in December 09′ to April 10′ respectively. This calculates an exact wave 3 price target using a wave 1 magnitude of 3.26 to 4.35 on January 8th 2010.
The question is weather or not the 3.26 low is a wave 5 correction low or a wave 3 of a larger time frame. On a daily chart it appears wave three MACD bottomed mid November of 09′ and a lower low price was made in December with a higher high MACD completing a trend. Again, the MPEL historical chart is very short on history so it is tough to say if this current trend is a reversal or the just the beginning of the final wave 5 lower and the end of wave 4 higher.
Because the near term chart has provided very accurate calculations it is easy to believe that there is possible upside potential with MPEL and still protect yourself from downside. The correction that took place after 5.68 price high in December 09′ tested the wave 2 price low. The depth of this correction was unexpected as the wave 2 correction was also a deep correction and alternation should have prevented such a low correction in wave 4. However, market sentiment and overall market pressures have been to the downside possibly adding to the sell off. Regardless, MPEL holding its wave 2 low during the wave 4 correction does add to the legitimacy of further upside moves. The wave 2 low should be a stop loss.
Wave 4 will often correct in a triangle pattern creating confusion for investors and unaware traders. Often wave 4 will occur when market sentiment is uncertain leading to the sharp moves to upside and downside, back and forth creating a triangle to a median price point. This waves range often takes the longest to resolve itself.
If MPEL should continue to trend higher it is then in the b wave of its wave 4 triangle correction and should trade to 5.12. Then again testing prior resistance at 4.56-the c wave, then 4.93-the d wave and 4.75-e wave. This where wave 1 of wave 5 will begin and trade to 7.17 in its own 5 wave sequence. These price targets were derived by using the estimated price targets from 3.26 to 5.68 and not adjusted for the actual price low of the a wave of the wave 4 triangle calculated 3.42. The wave 5 price target is projected from the actual price targets of wave 1.