OIH

C

ccwells

OIH has completed another five waves down to the 12/8/09 low. It has since bounced back up to the resistance level of 121. Whether or not the corrective process is complete is still in question. However, I do not see the price moving higher much further from current levels.

The bounce from 12/8/09 was firmly on the 233 EMA. The price has bounced upwards to retest the 55 EMA. With the candlestick patterns of the last couple of days, the upwards price movement may be over. We will see.

The price came within a fraction short of the 61.8% Fibonacci retracement level. It could potentially move to the 76.8% level, although I do not believe the odds are that great.

Going back to Elliott Wave analysis, if my count is correct, we are entering a third wave of a third wave. That means that the next move down will potentially be fast and deep.

That is the reason I am not too concerned about the Slow Stochastic being in the oversold territory. The indicators can stay in overbought or oversold territory for an extended time during third waves, especially third of a third wave as just mentioned.
 

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OIH has potentially completed two consecutive waves one and two. I have labeled on the chart waves I and II with waves 1 and 2. The wave label up to wave 2 appears complete in my estimation and the downtrend should resume immediately. On a 60-minute chart, I can count a five-wave pattern down from the 12/28/09 high. This is the first sign that a turn is about to occur. The 12/28/09 high is the critical level that must hold if the downtrend is to resume immediately.

What would be another confirmation that wave-3 of III has started? The first will be the break below the low of wave-b of 2. That would the low of 12/17/09. The next signal will be the break below the 12/8/09 low. That low is a bit far from the current price. If you want to nibble, I would consider shorting with the break below the low of 12/17/09.

What about price targets for OIH? If you are follower of Elliott Wave, you already know that we potentially could be about to embark on wave 3 of III. That will be an intense move. It will be fast and it will be furious.

My initial price target is 88, based on Fibonacci calculations and analysis.
I multiplied the move of wave I to 1.618 and subtracted that from the bottom of wave I. Other target areas that could cause a pause in price is 105 and 98.

You can trade this based on my recommendations mentioned above. If you are a little more aggressive, you can short now with a stop loss just above the 12/28/09 high.
 

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OIH made a higher high on 10/21/09 followed by a sell off that took the price down to the 12/8/09 low. From there, the price moved higher and broke above the 10/21/09 high on 1/8/10. The next trading day, the price opened well above the previous close, but could not hold those levels and closed down for the day.

First, the double top and failure is a 2B top. A 2B top is when the price breaks a previous high but sold off and closed down for the day, as it broke the top of 10/21/09 on 1/8/10.

Second, the price closed well below the previous days close and retraced 50% of the previous day’s range. The Japanese Candlestick pattern it formed is a Dark Cloud Cover, which is a reversal pattern.

Third, the Japanese Candlestick on 1/15/10 is a Bearish Engulfment. This indicates that lower prices are expected.
 
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