Let me point out the OUTRAGEUOS divergence on the top, and potential bottom.
I have marked the negative divergence with the red lines and the positive divergence with the green lines. As you can clearly see, Deckers kept on making higher highs with the price action, as the MACD made lower lows for 11 months! This is ‘textbook’ divergence. As for the positive divergence, it is really starting to look nice down at these levels. To see if this is a possible break out, let’s check out what the waves are telling us…
What I am seeing right now as my most probable scenario, is that we are working on our (4th) of 5 wave. This move off the top at 119.06, looks like a clear 3 waves down so far. What makes me believe that this is just a bounce is the behavior that 4th waves usually show. They are always the most difficult, and almost always seems like ‘news’ or ‘chatter’ for the stock starts to heat up right before it takes its last dive, or thrust up. What this does, is throw off all those traders that jumped on one step to early, and forces them to take their small loss before things get worse. And right before they know it, the stock begins to breakout in an impulsive manner. Shakes out the shorts or longs…
The level that you should be watching is $55-$61. If it takes a hard turn down from there you know that the most likely scenario is a 5th leg down. There is also some resistance at the $50 area, so this will act as a strong fence for the bears.
If, and only if it passes up through the $65 region would I think that the low as been seen. I would not be chasing this right now…. wait for confirmation.
Author: Peter Nitso
Contact: pnitso@yahoo.com