This Australian share CFD chart caught my eye today as an example of a potential 5 swing reversal setup
For those not familiar with Toll, I’ve included a brief description.
Toll Holdings Limited (TOL) is an integrated logistics provider in the Asian region and operates an extensive network throughout Australia, New Zealand (NZ) and Asia delivering seamless, end to end, local, regional and global supply chain solutions. TOL serves businesses in automotive, beverage, food and retail, industrial, ports, resources and relocation sector.
Toll’s shares were sold sharply when it announced disapointing profit guidance in May. This downgrade followed weakness in the retail and apparel sectors as well as subdued conditions in the auto manufacturing and steel industries all of which are major clients for Toll.
Toll is currently retesting the low established in August last year. The recent steep price decline, has left the fast stochastic deeply oversold. This supports buy set ups in shorter time frame charts.
The recent move down from the $4.74 peak in May has a 5 swing structure as outlined on the daily chart below. In these situations the end of the 5th swing often precedes a significant corrective rally.
I have used Fibonacci projections to identify potential ending points for the 5th and final swing lower. Friday’s low found a Fibonacci projection cluster which projects that the swing down from 4 to 5 will be:
38.2% of the length the swing down from $4.74 to the low at “3” and
161.8% of the length of the 4 to 5 correction
This level coincides with the major low from August 2011 shown on the weekly chart. So there are 2 technical factors indicating the possible significance of this support zone.
The buy setup was confirmed by today’s close which was above Friday’s high. This represented a rejection of the support zone.
The chart daily below outlines one potential approach to strategy.
The initial stop is placed just behind the recent low. If an uptrend develops there may be a chance to move this higher as the trend develops. I’ll post a follow up if things work out this way.
The profit objective is set just below the 50% retracement of whole swing down from May. This coincides with the resistance represented by the major low in May (dashed line).