Chart of the week: Odds favour the bull case here
15th January 2018 13:28
by John Burford from interactive investor
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Orsted about to break sharply up
Orsted is a major Danish renewable energy company (mainly wind farms). This company recently changed its name from Dong Energy in honour of the famous Danish scientist who was an early pioneer in electricity.
But it is the chart that attracts me. It has all the makings of one of my top setups - an A-B-C decline in a strong bull market, where odds favour a resumption of the uptrend to new highs.
This is the daily chart:
It shows the very powerful bull trend up to my wave 3 high in October. It then suffered a setback in a textbook a-b-c three down. But note the very large momentum divergence at the C wave low. That is a very good clue the reversal will be sharp and likely carry the market first above the b wave high at 365 Danish Krone (DKK) and then the wave 3 high at the DKK390.
In addition, I have a lovely wedge pattern in this wave 4 which also can be called a 'descending triangle' and, in classic charting, this is often a signal that the rally out of it will be sharp.
So, I have several clues that the uptrend will likely resume by moving sharply higher.
Along the length of the rally, I see very clear sub-waves - and that encourages me to think that the upcoming wave 5 will contain its own five sub-waves in due course. That implies a major high will likely be set well above the DKK390 high.
Naturally, if the shares sell off, I would not want to be around if it dips to the c wave low at DKK332. But odds very much favour the bull case.
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