Using a combination of my Elliott Wave Theory views combined with our Mathematical Regression Timing model, we can see the results of buying a stock when the sentiment is just about to shift from neutral to negative to neutral and then positive. As the crowds rush back into the rising stock, ATP already has a position.
Last week we started buying MCP (Molycorp) in the Rare Earth space, which everyone hated as of recently. This same crowd loved this space at the primary wave 1 sentiment crescendo peak last spring. We like to buy as the sentiment wave 2 bottom is turning (negative wave) to the Bullish wave 3 up.
Here is what I sent to my subscribers on Jan 21st (After we had purchased the position sub $29) (The stock broke out big 3 days later to near 32 a share as the crowd rushed in)
This company has exhibited typical investor and crowd behavior as it debuted around $12 per share and rallied to the 70′s as the excitement reached a crescendo on the Rare Earth space in 2011. It was around this time that we exited out of QMR in the 6′s and 7′s for some very good profits.
The Elliott Wave Pattern I outline here (If correct) would show that the first 5 waves are clearly impulsive to the upside, and then followed by what I call a 3-3-5 wave 2 pattern down to the $23 lows. This represented just over a 78% fibonacci retracement of the entire 5 impulsive waves up.
What should be happening now is some resistance by former bulls and current bears as MCP has trouble getting past $30 and staying there, but I suspect the sentiment will shift soon and the stock should eventually take a shot at 34-35 a share intermediately. If we get any pullbacks with the market or the price action, we will add another 1/3 to this position. For now I’m a tad hesistant to add because of that possible short term pullback…but stay tuned.
To confirm this long term chart pattern though, I would like to see a move over $30 with some strong volume and if so, we may just add a bit higher… so again, I’ll be watching.
This is potentially another example of an undervalued growth stock, like NQ and recently INVN, and NZ.V etc.
Here is the long term chart: CLICK TO ENLARGE
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