Active-Trader - 5 Days of Fib - Day 3

Welcome back loyal blog readers.

In this post we're going to pick up the pace on our review of the Fib lines and cover all 'usual suspects'. These are the big tech names that get all press because of the high prices and big point moves.

Fib on these charts can be a challenge because the Elliot Wave 1's occurred several years back and many points ago.  To find the Wave 1, you need to go to a monthly chart which is not even offered by default on the Thinkorswim platform.  Not a problem, just add the 10 year monthly time frame.

First up is everyone's favorite search engine Google.  Wave 1 started at the low of the real body of the monthly candle on 12/12/2008 at a price level of 142 and ended on 1/26/2010 at a price level of 312 on 1/26/2010.  Note how the 100% level was resistance for the better part of 3 years and the price did not break about that level and stay above it until the breakout that occurred in 2012.  After that, the price sailed upward and first found resistance - then later support at the 161.8 line at a price level of 417.  Note that the stock has since split 2 for 1 but it doesn't matter since all the price relationships are intact.

How do you know the fib levels are correct?   You often get clues along the way and the way prices reacted to the 161.8% line is a solid clue that these levels are good.  As for more recent price action, the 61.8% tree line line proved to be a good support level and the next major upside target for GOOG is the 261.8% fire line at 587. With the stock price closing at $560, the 587 price level is just a chip shot away and we could see that level as early as this coming week.

Next up is social media stock LinkedIn. Wave 1 started at the low of 56 on 12/24/2011 and ended at 123 on 4/6/2012.  I'm not a buyer of LNKD shares since the valuation is excessive with a PE of 666 versus peer FB which has a PE of about 85 and whose shares are much earlier in the speculation cycle.  I will be looking for potential opportunities to sell call credit spreads when prices approach overhead resistance.

Next up is online travel powerhouse Priceline - PCLN.  Looking at this chart, its hard to tell where to start since the chart has been in an up-trend for so many years.  In fact the low of the chart was 17.42 set back in 2004 and now the stock is at at 1278. That comes to about a 50% per year compound rate of growth which needless to say is a spectacular performance.   In any case, the stock took a pause back in 2012 and went into a corrective 5-wave down pattern.

From here it gets tricky and I have to admit I had a hard time coming up with levels which corresponded to a clear beginning and end of Wave 1.  What I came up with is Wave 1 beginning at a price level of 646 back on 2/18/2013 and ending at 820 on 5/28/2013.  Only problem is that 646 does not correspond to an actual low on the chart. Putting that aisde, the 261% and 423% levels have proven to be excellent levels of support and resistance on the chart, so for now, we'll just go with it.

Bringing PCLN up to date, we have paused at the upper tree line right at about 1276 and after some after we get through that congestion, I expect we will eventually see a new all-time high in the shares.

I also meant to cover Tesla (TSLA) and Zillow (Z) in this review but ran short on time so we'll have to cover those in a separate post.

That's all for now, have a great week ahead and good trading.