"failure is not an option ...": "standing in the corner and the paints is still wet ...."

Where are we at with NAB ?

It looks like we are into the home stretch for a wave 5 sell on NAB. Previously we looked at the NAB option chain at the beginning of august and the volumes and open interest all pointed to NAB rising through August with a price high tipped to be in the vicinity of $32.50.

NAB wave 4 retracement - 30th August 2013

Wave 4 analysis :

In the chart above, the key features are :

The wave 4 retracement should ideally be between 38% - 50% and NAB has retraced right on the 38% point.
The retracement has been confirmed by the Elliott ellipse study (in yellow) showing the retracement ended right on the ellipse support.
The wave 4 was also confirmed by the Elliott Trigger indicator (not shown) which cut above the zero line on the 15th August.
The wave 4 retracement held at the second level of wave 4 support lines shown as green XXX above indicating around a 60% probability of the next wave 5 making a new high above the previous wave 3 high of $31.52
Finally, the Profit Taking Index (PTI), should be above 35 and NAB weighs in at 50 further supporting the potential for a higher wave 5 finish to the month.

The key question here is, "where will the NAB price slow down, roll over and enter into a declining trend ?" To analyse this we look at the following chart and notice that the previous wave 3 is a complex wave, which the NAB wave 3 is, then we would expect the wave 5 target to move up to a 61.8% Fibonacci level, which is the exact point that NAB hit on 27th August.At this point there was an expectation that NAB would begin to retrace into a short wave 1 and then back up to around $32.75 as a wave 2 before dropping materially down to around the previous wave 4 at $30.28.

NAB wave 5 - August 30th 2013

However, today September 2nd, NAB had stormed ahead and at noon today has hit a high of $32.95 which may indicate two possibilities.

The original analysis of the option chain volumes indicated a potential target price based on PIN risk and volumes on the chain at the beginning of the month, of $32.50. In our case, today's price has more than hit that level and also aligns neatly to the Fibonacci level of 61.8%.
The second interpretation is that one of the Fibonacci guidelines is that if you break above one Fibonacci level you are generally heading for the next, which in our case is $34.27 which I feel is unlikely. To investigate the possibility of reaching this level we can analyse the sub wave patter in this wave 5 movement which can be seen in the chart below.


Wave 5 inner sub wave extension - 30th August 2013

Using the same logic as discussed above, if we expect the wave 5 to extend to the 61.8% point on the chart, then the sub wave 5 has a potential target of $33.41. However a more likely range is between the 50% and the 61.8% target which gives us a lower target of $33.12 up to $33.41.

Planning the trade

As NAB gets into the range above $33.12 we need to begin setting up our trade for the wave 5 sell with an expectation of a retracement back down to the previous wave 4 low of $30.27.

To fine tune our timing we use the 7,4 displaced moving average. Once price cuts below the DMA we will enter the trade and place stops above the previous high.
Guidelines for highlighting the area of the wave 5 peak include looking at the 61.8% Fibonacci point but added to this Elliott mentions drawing trend lines from the wave 2 & wave 4 points and using parallel copies to extend out from the wave 1 and wave 3 peaks.It is postulated that the wave 5 high should end when price gets between these two extension lines, which in our case is $33.12 & $33.41

NAB Sub wave 5 trend target zone - 30th August 2013

Now the game is one of being patient until the DMA is tripped. The chart below shows where we are at 1pm today and at this stage things all seem to be on track.