In early April 2011 I had a brief exchange with Xiphos_Trading on StockTwits who does great analysis and in particular had my attention with some analysis on GOLD- Randgold Resources Ltd.
I don’t trade GOLD but do find the Elliott Wave correlations in many of the metals to be interesting. I hadn’t had a chance to catch up completely with my initial statements and thought I’d take a deeper look into the GOLD chart.
Initially I thought the chart below Xiphos_Trading was showing of the daily chart of GOLD could have more room to the downside because trading had stalled at what I thought may be prior wave 4.
But a look at the bigger picture starting with larger time frames of GOLD shows that GOLD may have already completed a corrective triangle wave A at a 52% correction low of 70.18.
It is this low that I will focus on and try to pinpoint in the price history of GOLD to project possible upside in the GOLD chart.
Starting with a weekly chart up to the first peak in MACD back near 4/18/08.
From this point in the price history it is assumed that GOLD is in a wave 3 peak. This is because the highest peak of MACD is construed to be a wave 3 peak.
The correction was more than 38.2% which means that a triangle correction is expected and the wave A reached a 618 retracement.
When counting an Elliott Wave a triangle wave 4 ends at the E wave of the triangle or the 38.2% correction level estimated or actual; this is the theory at least.
This level is shown in the chart above with the white horizontal line and correlates to 38.32 on 1/23/09 weekly.
The monthly time frame chart continues to show strength.
The MACD then reveals that the prior peak in price should not be interpreted as a wave 3 of this larger time frame, but a wave 1, as a new peak in MACD is made.
The chart below shows a fibonacci extention which the wave 3 projection is reflected in the price peak of 106.44 (2.236% of W1 roughly) as well as the peak in MACD from the original price zero in 2002.
This is an example of how every wave 3 is a wave 5 to an extent. It is relative to ones time frame.
The wave 4 correction from 106.44 has reached an anticipated 1.38 level shown with the fibonacci lines. This level is the mathematical projection of wave 4 based on an initial wave 1 magnitude.
Understanding the 70.18 low.
The 70.18 low may be a 53% correction wave A triangle low if you project the correction from the prior triangle E wave- 38.32 shown above from the weekly chart.
This low is where calculations would originate from in theory, not absolute lows shown in price motion from wave A.
This is shown in the chart below using a fibonacci extention of Elliottt Wave calculations.
Here parent wave 3 has actually reached a 53% correction level of the wave 3 magnitude itself at the monthly time frame.
This is a common triangle wave low percentage and could possibly explain the negative peak in MACD shown on the weekly time frame correlating to a turning point price low.
Represented in MACD the A wave of a triangle correction will not diverge to a lower low in price at its relevant time frame. This peak low in MACD is shown in the chart below.
The triangle wave count.
The internal wave count of wave A can diverge to this low but it is not in theory that the A wave should contain 5 waves.
The chart below shows the daily time frame divergence count of wave A, if this is indeed the low, and correlates to the capitulation that was called by Xiphos_Trading.
The B wave of the triangle is reserved to contain 5 waves at times. The possible five wave projection of wave B is shown in the chart mark up below.
If GOLD is in its B wave of a triangle then the wave count projections below may show what to expect in the price motion of GOLD.
Mathematically the A wave projection was quite accurate to projections using actual prices.
An alternative to near term upside projections in GOLD and further correction.
If the triangle correlations are not accurate and the current lows are breached, the 56.00 range at this time is roughly the peak of what is being interpreted as parent wave 1 and would be a 53% correction of the complete wave sequence from ipo.