ConocoPhillips (COP) Continues Rally, Short-Term Drop Expected
Updated February 1, 2018
Our original projections of the Cycle wave 3 appears to have been 7 days premature. This should not impact our wave 4 bottom by too much. Our new levels of interest are 58.95, 57.20, 56.36, and 53.78. The average retracements, mentioned in the original article below, over the course of the Grand Supercycle have not changed and are responsible for these levels of interest. 2017 Quarter 4 earnings failed to result in major upward movement which instills confidence the stock will continue to fall and carryout this corrective wave. Our target price has risen to 56.20 and moved to March 5, 2018. DISCLOSURE: We have short positions for this stock at the time of this update.
Originally Published January 14, 2018
By: Chris Guthrie
ConocoPhillips (COP) has been in a well-defined Grand Supercycle Elliott Wave since 2002. All of the major waves and almost every single minor wave have been noticeable and predictable. Right now the stock is in the final stretch of this Grand Supercycle which is set to potentially wrap up before Christmas 2019. The stock will rally at a macro level but corrections will occur along the way. At present, a short-term drop is expected through the beginning of March. All projections in this article will be updated and refined as each minor wave ends. The image below lays out where the stock has been and where it is intended to go over the next 16 months.
Our following projections use the terminology and symbology from this chart
Grand Supercycle Wave
We project the stock to reach 87.00 by Christmas 2019. This could result in a double top for the stock which would most likely result in a retreat or the stock could push through levels of resistance around this level. When a top is reached, the Grand Supercycle will be completed. This will allow for a new trend to begin. As of now, we project the stock to gain at least 45% by the end of 2019 from the close on January 12, 2018 which was 60.05.
The Supercycle in the fifth wave of the current Grand Supercycle is currently in the middle of wave 3. The current projected ending of this third wave will be around mid-June 2018 around the 66.41 level. Once wave 3 ends, we believe the stock will drop for its fourth wave to about 59.75 around May 2019. The final wave in the Supercycle will occur when the Grand Supercycle ends. Once again, we estimate the 87.00 level should be achieved before the end of 2019.
The Cycle in the third wave of the aforementioned Supercycle is currently believed to have just completed its third wave. This assessment could change over the next few weeks if wave 3 has not officially finished. With this assessed wave 3 completion, wave 4 has begun and should take the stock down toward 55.72 by the end of February 2018. Once wave 4 ends, wave 5 should take the stock back up to 66.41 by June 2018.
Primary and Intermediate Waves
Both Primary and Intermediate waves are believed to have been completed on January 12, 2018 with the conclusion of wave 3 of the Cycle wave. If this assessment is inaccurate waves 5 for the Primary and Intermediate waves will be reassessed in kind.
Finding Cycle Wave 4
Based on the assumption that Cycle wave 3 has ended, as well as its subordinate Primary and Intermediate waves, it is time to project the movement for wave 4. The image below has boxed in the most likely location for the bottom of Cycle wave 4 (identified with cyan IV). The outermost lines bounding the box are composed of averages, medians, standard deviations of retracements and trading days elapsed. A retracement can be determined by calculating the movement in wave 3. Plot the location where wave 3 began as 100% and the location where wave 3 ended as 0%. The retracement is the distance down from the end of wave 3. I like to look for retracements between the two Fibonacci points of 23.6% and 61.8%.
Over the course of this Grand Supercycle there have been 12 completed impulsive Cycle wave 4s. On these occasions, the average retracement from Cycle wave 3 has been 40.15%. When applying the standard deviation of these retracements (20.92%) to the top and bottom of this mark, levels 61.07% and 19.23% are recorded. Lastly, the median retracement is 33.33%. Of note, the 61.07% level is very close to a key Fibonacci level at 61.8%. This will give us 4 levels of interest: 58.07, 56.48, 55.72, and 53.36.
The final pieces of information regard trading days elapsed over the course of this Grand Supercycle. The median days elapsed are 8 with an average of 27.5 (rounds to 28). The standard deviation is 28. Applying the standard deviation on the low-side of the average would result in a negative number so it is ignored. When added to the average, the result is 56 days. This gives us 3 dates of interest: January 25, February 22, and April 3.
If Cycle wave 3 has concluded, wave 4 will most likely occur between January 25 and April 3. The stock will likely drop between 53.36 and 58.07. We are leaning for the bottom to occur around February 22 around 55.72.
Finding Cycle Wave 5
For right not, we are estimating Cycle wave 4 to occur around the 55.72 level on February 22. If this projection is dead on, the following wave 5 projection would stand on more solid ground. We will use this estimate for now in order to lay the groundwork on finding the end of Cycle wave 5 which also ends Supercycle wave 3.
The following is based off of the 12 instances of completed Cycle wave 5s in the current Grand Supercycle. I tend to look for Fibonacci levels between 61.8% and 161.8%. The minimum wave 5 level so far was 102.77%. The median extension of wave 5 in relation to wave 3 is 129.04%. The average is 136.59%. Adding the standard deviation (40.03%) to the average yields 176.62% and 95.56% when it is subtracted. Of note, 176.62% is close to Fibonacci level 176.4%. This gives us the following levels of interest: 59.85, 63.51, 64.36, and 68.88.
When looking at the trading days elapsed, the average is 39 days, and median is 12. The standard deviation is 41 which results in a negative number when subtracted from the average and 80 days when added. This gives us 3 dates of interest again: March 9, April 17, and June 13. Wave 5 could end somewhere in this box which is quite broad and large. We will try to narrow it further below.
Finding Supercycle Wave 3
Determining the location of Cycle wave 5 is based off of two estimates, either of which could be wrong and throw the whole projection off. Predicting the end of Supercycle wave 3 is based of more concrete information. The only downside is the data is based off of only 2 occurrences in the current Grand Supercycle. We will attempt to determine Supercycle wave 3 and lay it over Cycle wave 5's projected area as these two instances will occur at the exact time.
The median and average trading days and extensions of Supercycle wave 1 are the same figures so only the average will be plotted on the chart. The average extension from wave 1 is 159.85% and standard deviation is 29.27%. This gives us 3 levels of interest: 59.93, 66.41, and 72.88. The average trading days in a wave 3 cycle is 191 with a standard deviation of 2. This provides 3 dates of interest: May 18, May 22, and May 24.
When Cycle wave 5 data is plotted together with Supercycle wave 3, our projected area gets much smaller. We still require more time and data to get a better estimate, but for now we project the following. These waves could end toward the end of May 2018 between 59.93 and 68.88.
All current projections are displayed on the interactive chart below
Continue to check back as we ride the waves to the end of the Grand Supercycle. This article will be updated as new minor waves are completed until the Grand Supercycle has finished its Wave 5.
DISCLOSURE: We currently do not have any positions in the mentioned stock. We may initiate a position in the next 72 hours. This article is for reference only and should not be solely relied on to predict future movement. Historical movements and technical indicators should never be the sole basis for entering positions involving risk. You should not take a risk without fully understanding the system, market, and having established trading discipline. Make sure appropriate research is conducted prior to taking any risk in a marketplace. The author and Limitless Life Skills LLC do not have a financial relationship with the companies mentioned in this article and all expressed views are that of the author.