(LH) Hog Techs Turn Positive...Again

By: RJO MRTFebruary 15, 2012 8:38am CST 7747


Technicals, February 15, 2012; 5:50am

In what has proved to be a volatile first two weeks of February, the market's sharp rebound yesterday from the area around the (88.00) 61.8% retrace of late-Jan/early-Feb's 86.30 - 90.75 pop has exposed the sell-off attempt from 02-Feb's 90.75 high as a 3-wave affair as labeled in the 240-min chart below. Left unaltered by new lows below Mon's 87.875 low that now serves as our short-term risk parameter, the 90.75 - 87.875 decline is considered a corrective structure that warns of a resumption of Jan-Feb's developing bull trend to what could be significant gains above 90.75.


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Prior to 01-Feb's breakout above 89.50, the daily bar chart above shows this level as a technically pertinent one. It provided support in mid-Nov and, after being breached in early-Dec, capped the market as new resistance. Since 01-Feb's breakout above 89.50, the extent to which this market wafted back-and-forth around 89.50 rendered it useless. Moreover, the fact that the market failed to sustain 89.50+ gains and rejected the (90.72) 50% retrace of Oct-Jan's 95.75 - 85.70 decline exposed the Jan-Feb recovery attempt as a 3-wave and thus corrective affair that could be part of a broader bearish count.

But now, as a result of yesterday's smart gains and despite the exact 50% retrace of Oct-Dec's 95.25 - 85.80 decline on a daily log close-only basis below, the Feb sell-off attempt also looks like a 3-wave affair to what arguably is a developing bull trend to what could be steep gains above early-Feb's high. This bullish prospect will remain intact as long as Mon's 87.875 intra-day low remains intact or Mon's 87.975 low close remains intact.


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On a weekly log active-continuation chart basis below, the market remains within the past five months' range, so the aimless whipsaw risk this market has experienced recently is not surprising. It is only a matter of time before we think this market breaks out from the 82.40 - 92.35-range that has contained it for the past five months. And as a result of yesterday's rebound and a bullish sentiment condition that is closer to the lower bounds of the past couple years' range, we believe the odds have shifted to a bullish, upside breakout as long as recent lows like 87.875 and especially 27-Jan's 86.225 low remain intact as support and risk parameters.

These issues considered, a cautiously bullish policy is advised with traders approaching setback attempts to the 89.00-area as interim corrective buying opportunities. Weakness below 87.875 is required to threaten this view while a break below 86.22 will negate it and resurrect a bearish count that could spell long-term trouble. Needless to say, a break above 02-Feb's 90.75 high will confirm this count and could expose major gains immediately thereafter.


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