In response to Moody comment, I decided to write a blog post to review the crude palm oil commodity trading from 2007 to 2009. Is there any different between the 2007 Bull Run and this coming rally at the beginning of 2009? If you look at the chart, I have placed a question mark there for us to consider what could be the Elliott wave count. How about chart pattern analysis for FCPO March contract? Let’s analyze the chart.
From the Chart Pattern Analysis point of view, it is very obvious that a breakout from the symmetry triangle is a trading signal to go long. Technically speaking, I would expect a bull run for FCPO from here. A corrective retracement is also likely from here. In conclusion for chart pattern analysis point of view, it is a call to long crude palm oil futures.
In the CPO chart above, I have marked the possible Elliott Wave Count. It is not comprehensive wave counting but it is sufficient to allow us to exploit potential trading opportunity. However with the breakout from the symmetry triangle chart pattern, it has indeed invalidated the Elliott Wave Count. It could be interpreted as A-B-C pattern which completes the whole corrective wave. But if it is completed, why should there be another triangle chart pattern after the Elliott C wave? Now we should be thinking.
If we are basing on the Elliott impulse wave count, then we are seeing a 1-2-3-4 impulse wave count. This could explain the triangle chart pattern. But usually triangle pattern is the last of the corrective wave and we should be expecting an Elliott impulse wave 5 down. But the breakout is upwards and bullish in nature. Again, this keeps us puzzling of the possible wave counts.
Am I missing something here? On further exploration, there is a possible explanation to the Elliott Wave for the FCPO chart above. If we look more carefully at the triangle around Oct – Nov 2008, we could possibly see an Elliott impulse wave 1 after the A-B-C corrective wave pattern. The impulse wave 1 was followed by corrective wave 2 which is the remaining of the wedge and the breakout signalling the beginning of Elliott Wave 3.
Another interesting thing to note is that the 2007 Bull Run started around March 2007 and peak about a year later around March 2008 and followed by bottom around the beginning of Jan 2009. The interval between the breakout, peak and bottom was approximately about a year or less.
So, in conclusion, I am bullish for FCPO at the present moment for two main reasons. The first is that the breakout from the triangle chart pattern and the second is being a possible beginning of Elliott Wave 3 from here. As for the Elliott Wave Theory, there are many possible wave counts and therefore future information will be needed to fill in the blank of our chart analysis. So, trade along the main direction until its trend reverses. Oh, forget to mention that if it was a five impulse waves down, then the bear trend for the CPO has not completed yet and this rally is merely a corrective wave to the first round of selling. But who cares since we can go long or short at anytime when we see the trading signal triggered.