"NAB leaking on the inside ...."

The normal average daily share turnover for NAB is around 5.8 million per day, however on Thursday 26th September more than 10.7 million shares were traded before noon with the day finishing with around 15 million shares being traded.

NAB share volume - 26-9-2013

Another interesting observation was that NAB's share price has been surging recently from a low of around $29 four weeks ago to a current price of around $35.45.

NAB share price surges to drive a wave 3 high - 27-9-2013

So who is driving the interest ? If we look at the 5,35 Oscillator which tends to indicate retail buying we can see it has curled over and is dropping, but the 10,70 oscillator which tracks institutional buying is still growing strongly.

Retail - 5,35 Oscillator

Institutional - 10,70 Oscillator

So we have price and volume surging and it seems to be driven by the institutional buyers pushing the Elliott count to a strong wave 3 high. Clearly a good question is where is the price rise likely to slow and head down - just what is a reasonable peak price for NAB? One of the ways we can investigate this question is to look at the CALL option volumes for October to see where the smart money is putting the option volume.

NAB PUT Option volume - 26-9-2013

Now for every share buyer there must be a seller and when we looked at the Call volume compared to the PUT volume, the $34 PUT options are materially pumped up at 8,900 contracts with around 7,300 being done before noon, compared to the usual average of around 100 - 300 contracts. At the time this PUT volume was transacted the deltas for this strike was around 22. Interestingly, a few days earlier when the NAB price was lower, the PUT volume was going through on the $33 PUTs with the volume of PUTs reaching 13,300 which is also materially above the daily averages, and at the time the delta was also around 25.

As an option trader, the most cost effective point to buy options is at a delta between 25-35 as this is the flat spot just before the delta curve really steepens up. The logic for this type of strategy is that if you are right on direction, the option really picks up value via the faster leverage as the deltas increase non linearly. However if you are wrong, the options slide back onto the flat part of the delta curve and you do not lose much of your option investment.

The key point here is that this PUT volume is really extraordinary. Thus the indication here is not so much the buying strength from the institutions, but rather the selling strength and with the current price at $35.40 at a wave 3 high and a wave 4 retracement in the wings, it seems further confirmation that the wave three is correct and a wave 4 is following.

Now, with price and volume surging, combined with enormous PUT option volumes being placed on NAB, this would seem to suggest that someone at NAB has leaked some sensitive market moving news or that some of the key institutional players know something about NAB, such as an unfavorable announcement around profit guidance or M&A activity etc. that may be due for release to the markets soon and they are getting in ahead of time before the price declines. If this is what is causing the abnormal trading activity, it would seem that the institutional traders may be continuing to push the price of NAB up close to when the announcement is due to take place, whilst simultaneously they also buy considerable downside protective PUTs to lock in their profits, leaving the poor retail investor to foot the bill for the institutions profits as they sell out at the price high on the extended Wave 3 high, and take further profits from the heavy investments in very large protective PUT positions.

Time will reveal just what the insiders know and a Fibonacci time projection suggests around October 3rd is a clustering of actions.

Just remember that the ASX is not that deeply liquid at the best of times, and with these abnormal PUT volumes lurking, caveat emptor .....

Cheers

"as the world slides into further decay ..."

"day after day, alone on the hills,
the men with the foolish grin are keeping perfectly still ..."

and they think that nobody notices, but we do, to our shame.

Cheers

"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 :

1. The wave 4 retracement should ideally be between 38% - 50% and NAB has retraced right on the 38% point.
2. The retracement has been confirmed by the Elliott ellipse study (in yellow) showing the retracement ended right on the ellipse support.
3. The wave 4 was also confirmed by the Elliott Trigger indicator (not shown) which cut above the zero line on the 15th August.
4. 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
5. 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.

1. 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%.
2. 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.

1. 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.
2. 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.

Hopefully I haven't painted myself into a corner and these are not famous last word and I live to analyse another day ?

 Cheers

"the donkey pulls the pin on NAB ..."

Back on August 2nd I looked at the option chain for NAB and it seemed to suggest that the smart money was hedging at around the $32.50 mark indicating that in the short term over August the direction was predicted to be up from the current low around $29.50.

Looking at the price chart below we can note 4 things :

1. The price trend and regression pattern have in fact been upward trending since the beginning of August.
2. Within the current wave 3 is a sub 5 wave count indicating that the next price target is around $33.19 and confirms the earlier price prediction of a $32.50 price target based on the open interest and volumes in the early option chain denoting where the expiration PIN risk might be for NAB.
3. Finally, I like to use the ADX as an indicator for entry and exit. The key element worth noticing below is that the DMI + & - lines are diverging quite strongly and the ADX line is moving up quite strongly indicating a strengthening pattern. Technically we would look to enter a trade with strong divergent DMI lines once the ADX line is between the two DMI lines and this looks to be about to take place next week.
4. If you follow Elliott wave and Fibonacci, one of the guidelines is that if you break one Fibonacci level you are heading to the next, which in our case is the 100% extension level at $33.19

NAB price chart - 23rd August 2013

Another point of reference for the Elliott Wave enthusiasts in the above price chart is that the inner 5 wave sequence shows a wave 4 retracement which halts right on the 38% point which is a classic retracement point.

The next step in refining this type of analysis is to check the option chain for August at expiry to see if the PIN risk prediction for August is confirmed and whether the September chain volumes are still indicating a retracement to the low $30's as this would be in line with the Elliott pattern shown above.

Cheers

"Pin the tail on the donkey trader ..."

Looking at the option chain for National Australia Bank below, (NAB.AX), I notice a couple of interesting observations :

1. The open interest for the August chain, there are 6,550 PUT contracts for the $30 strike and 9,290 CALL contracts for the $32. If we assume the big fund managers are pushing the price on market around for the stock, then by the August expiration we might expect the stock price to gravitate towards $32 as this is where the bulk of the risk hedging has been placed.
2. When we analyse the September chain, the bulk of the contacts are for the $31 CALL(8,330) with the PUTS having their peak open interest at the $29 strike (5,300)
3. Taking each of these points together, it would seem to indicate that in the near term NAB was set to rise to around $32 and then by September the price would pull back to at least $31 or even $29.

If you believe in PIN risk, it is an interesting theory, but is there any other evidence we might be able to review to get some comfort on the direction of the NAB price in the near term ?

NAB Option Chain August & September at 11.30am 2nd August 2013

One other piece of information we can look at is the Elliott wave count for NAB to see if there is a similar pattern.

If we look at the daily chart below, we notice the following indications of direction :

1. NAB seems to be in a rising Wave 3 with the first target around $32.50 which lines up with the August Call Open Interest target.
2. The 10,70 Oscillator, which is used to track the corporate money and influence, suggests that NAB is still rising.

 

NAB Daily chart 2nd August 2013 @ 11.30am

 Interestingly, it seems that the Wave three is near it's peak and looks to be getting ready to retrace back down to around $29-$30 which is where the bulk of the Open Interest is at present for the September chain.

Whilst these are only observations, they do seem to line up, so time will tell if this theory holds up and we do not end up being the donkey being pinned.

 

 

Cheers

"mid life crisis or introspection ....?"

Melbourne French Film Festival 2013

Over the past few weeks I have been attending the French film festival and there seems to be a recurring theme in many of the films I have seen. Predominantly it seems to be people time lapsing either forward or backward in their lives, being confronted with either a situation or the realisation that they are not nice people and attempting to deal with the situation for the better before shifting back into their original place in time.

Therese Desqueyroux is an independent women with strong independent thought that the luxury of great wealth allows  But even from an early age she seems to accept that she must marry Bernard, the son of another local land owner in order to form an alliance and stronger family fortune. As time progresses, Therese becomes more introverted and reflective of her youth to the point where she attempts to poison her husband in order to escape the life she is trapped in.

 In "Another woman's life", we meet up with Marie when she is around 20 and meets Paul for the first time. She is absolutely captivated by him and see her life just beginning but when she wakes up in the morning she has skipped ten years of her life, she is the CEO of a successful company, feared by her employees, a stranger to her son and in the process of divorcing her husband - all before she has had the chance to experience the passion of life. We do not know why she has jumped a decade of her life but we follow her struggles to understand her situation, reacquaint herself with her family and get to know her son, deal with her role in the corporate world as an economic sage and builder of companies and most important of all, she grieves for the loss of her husband and works frantically to head off the divorce that is rapidly becoming a train wreck.

 In Camille Rewinds" we see Camille as a 40 something woman, who life is in ruins, the husband she loves is in the process of selling the family home and divorcing her. On New Years Eve, Camille goes to a party of her old school friend and because of the futility of her life at this stage, she is drinking heavily and passes out in an alcoholic stupor right on midnight. When she awakes she is 16 and back in school and has to deal with all the frustrations that bubble to the surface. The absurdity of every day tasks ar a constant challenge to her, riding her bike to school, squeezing into gym clothes, avoiding boys, being lectured at by teachers are made all the more difficult because although all those around her see her as a 16 year old she looks to us and herself as still the 40 year old woman with all the emotions and memories of that 40 year old woman. Key among those memories was the day her mother died of a heart attack and it is this event in her life that is central to her review of her life and the relationship with her parents and the plight she has to try and circumvent the death of her mother. All to no avail. However as we see towards the end of the film, in the same way that Camille could remember her life as a 40 year old women when she was spun back to her teenage years, she could remember the love and affection for her husband whom she met at school all those years later when she returned to her current life. The closing of the film sees Camille reworking her life and affections for her estranged husband and saving the marriage.

In each of these films I cannot decide if it is a coincidental theme of whether the French film industry is in the dramatic throws of a mid-life crisis on is contemplating either it's past successes and failures or the confusion about the path into the future. Clearly the films at this years event are significantly below the standard of the 2012 film festival in my humble view.

Cheers

"trading the plan ..."

"... everybody has a plan,
until they get punched in the face ..."

Mike Tyson - World Champion Boxer

Volatility is still lurking even though the VIX is down at 13. Rising markets breed complacency.

Cheers

"... the illusion of freedom ..."

"... freedom is possibility and anxiety is the possibility of freedom ..."

Søren Aabye Kierkegaard, 1844

Cheers

"welcome to the factory floor ..."

Midlife is the moment of greatest unfolding, when a man still gives himself to his work with his whole strength and his whole will. But in this very moment evening is born, and the second half of life begins.

Passion now changes her face and is called duty; "I want" becomes the inexorable "I must" and the turnings of the pathway that once brought surprise and discovery, become dulled by custom. The wine has fermented and begins to settle and clear.

Conservative tendencies develop if all goes well; instead of looking forward one looks backward, most of the time involuntarily, and one begins to take stock, to see how ones life has developed up to this point.The real motivations are sought and real discoveries are made.

The critical survey of himself and his fate enables a man to recognise his peculiarities. But these insights do not come to him easily; they are gained only through the severest shocks.

Carl Gustav Jung - Collected Works, Vol. 17, p193, Routledge & Kegan. London, 1954

Over the years, five of my friends grappled with discovering these insights, only to confront the "severest shocks". May their souls rest in peace, even if they did not find the answer.

"help someone see a better future ...."

Way back on 15th January 2010, I raised the question around the severity of unemployment and the collateral damage it has on individuals, families and the economy. This week, Ben Bernake speaking at the Feds annual retreat at Jackson Hole Wyoming, on the economy made the following statement :

We cannot afford to stand by idly while millions of Americans remain unemployed or underemployed for years and years, Federal Reserve Chairman Ben Bernanke said Friday. It’s up to Congress and the Obama administration to do something to speed up the sluggish recovery ....

Ben Bernake - August 26th 2011

 For an economist who is touted as one of the foremost exponents of the Great Depression and the economic impacts it savaged in its wake, I cannot help wondering how both Bernake and the Fed missed the following signals :

• Both the quantitative easings really seemed to miss the economic stimulus target,

• Immediately after the GFC crash initially and recently, politicians clearly exhibited a passion for arguing their own case in the senate rather than looking at the bigger global economic picture - this puerile idiocy wiped around US$7 trillion off world markets when the funding supply bill stalled in the senate last month.

• Right back in the 1940's when Keynes wrote his ground breaking work on Money, Employment and Interest rates, it was obvious then to every undergraduate that employment was the core key to economic stimulus. The dollars earnt from a job would be split between stimulating domestic consumption, impacting the velocity of money (MV=PT), and personal savings, where banks, if suitably rewarded would lend back into the economy, driving further stimulus.

•  And on the regulatory & governance side of things, how could they have missed the poorly conceived impacts of Basel II on financial institutions - simply stated Basel guided banks to get better data so they could build smarter models so that they could cut their capital holdings. Enter the GFC, stage left, and retail savings dried up, wholesale markets crashed and burned so global funding markets were not prepared to lend, liquidity went from reality to a definition in a dictionary. The result was hundreds of financial institutions failed and we now have Basel III - and do you know what the result of Basel III is ? Tougher controls around liquidity holdings, removal of convoluted hybrid capital instruments from tiered capital calculations and tougher stress testing (which most banks seem to still be failing). So how does an organisation like the Fed miss these really big systemic shifts - do they need it written on the back of their cereal packets so they get a hint each morning ?
  
  
  

• Another great gaff : Mark to Market, Value at Risk and the accountants need to tell the world that there has been a financial change. Portfolios are marked to market each day and the accounting standards enforce that a CFO must inform the market of any material changes under the continuous disclosure rules. So when there has been a market glitch and CNBC run the story ragged and the markets sell down banks, continuous disclosure kicks in and although in many cases there was no material changes in these financial institutions structurally, the portfolio values had changed overnight due to market prices materially moving as a result of a news item or similar issue. The following day the markets open lower and the CFO reports the change, the markets reacted and the portfolios go down again & still nothing material is happening in the institution. This cycle keeps repeating until the market comes to its senses. How did the regulators deal with this ? They changed the rules and allowed institutions to make a call on when they should inform the markets and gave them discretion on how big a move would be seen as material and in conjunction with their auditors they can decide if the continuous disclosure rules will apply. Unbelievable, wish I could do this with my tax return.

• The theme that is developing here is that politicians and regulators have taken their eye of the main ball : EMPLOYMENT, and keep re-regulating and focusing on the economic symptoms which continue to occur at a more frequent and alarming rate and we continue to move ever so close to recession and or deflation.

 Hey Ben, even in ancient times they new the value of   "Teach a man to fish ......"

Unemployed & in debt ...

Cheers

"Poetry as evidence of life ...."

Poetry is just the evidence of life,

If your life is burning well,

then poetry is just the ash.

Leonard Cohen, I'm Your Man 2010

Cheers

"Not waving, drowning in IV crush ..."

Over the past year the VIX has been steadily dropping from a high around 47.50% to the current level of around 15.5%. Some would say that this is a significant drop indicating that the volatility in the market has gone away and that Calendars are probably an excellent option strategy to employ. The rationale behind this is because if IV is mean reverting, then there is an expectation that IV will begin to rise significantly as the market hits all time post CFC highs and reverses.

VIX Volatility Index as at 22nd May 2011

A glance at any of the main indexes shows that they are all at their highs and comments in the markets from fund managers and traders alike suggest that a major retracement is imminent - interestingly the commentators have been saying the pull back is imminent for months now and yet the market just keeps rising and the VIX just keeps dropping.

DOW JONES as at 22nd May 2011

So if IV is so low, how have Calendars been going over the last few months. In a word, horrible. But why is this happening. The short answer is that the VIX is really not telling us the full stroy on IV.

Intra day volatility is going through the roof on some days while on others it is quite flat. Over the past week the DOW dropped 80 points one day due to rumours around further Greek sovereign debt worries, and then jumped up 60 odd points the day after on the basis that the Bond market was not that worried. One and two standard deviation moves happening back to back are becoming an all too familiar sight on the markets these days.

Market Makers have essentially been reflecting this market indecision by concentrating more on the IV of the front month rather than the back month and thus strategies such as Calendars are finding that the gain through rising IV in the back month is just not enough to compensate you for the IV crush that happens to your short front month legs in the Calendar resulting in the trade losing money. This has been a familiar pattern over the past six months as the IV keeps dropping but intra day spikes keep the Market Makers on their toes.

So if we believe that the market is on it's highs and a material reversal is just around the corner and we want to do Calendars, how much pain can we take from IV crush once we are in a trade ?

One way that we can gauge the pain and establish a rough point for when we would have to adjust our trade is to use the following formula:

IV of long option - (Calendar Skew * 150%)

SPX ATM Calendar Skew - 22nd May 2011

 Plugging in the numbers from the option chain for an ATM $1335 Call Calendar we get :

June IV : 12.29%
July IV :  13.13%
Absolute Skew is : 0.84%

So adjusting the ATM IV of the long back months option by 150% of the skew we get :

13.13% - (0.84% x 150%) = 11.87%

The interpretation of this 11.87% is that the IV of the trade can drop from 13.13% down to 11.87% before this trade will begin to lose money. That is and IV crush of 1.26% or a negative move of around 9.6% in IV before we begin to feel the pain in this trade. Another way to look at the 11.87% is that if the IV drops and the 0.84% skew disappears, then the price of the Calendar should still be around the same price we entered the trade for. This would enable us to exit the trade near break-even.

Cheers

"NAB - rewarding us with high risk ..."

Back in mid March, NAB finally snapped out of the channelling wave 4 that it had been wallowing in for close on eight months and since then has been in a significant wave 3 rising to a recent high of $28.18.

NAB Daily - 12th May 2011

In the chart above we can see that the Wave 3 looks to have completed right on the price predicted by the MOB - $28. So where to next ?

Elliott Wave theory would suggest that there will now be a pull back to around 38% and then the upward trend would continue with a new Wave 5. Well that's the theory anyway. The immediate concern is that if we look at each of the points 1, 2 & 3 marked on the chart, each of them in turn looked as if it may have been the peak of the wave 3 and when the retracement began the price retraced to the 38% point and then returned to the upward trend. Even today the DOW dropped 139 points and the ASX has opened down with NAB droppi9mng and as at 12.08pm, NAB had touched the 38% retracement. If the previous examples are any guide for us, we should probably wait to initiate any PUTs to protect us on the downside until it is clear whether NAB will break the 38% point and move onto a more solid 50-68% retracement level.

Whilst reaching the 50% retracement level might be a safer point to enter the trade, the price is virtually breeching the wave 4 band (green & red) and at this point there would be an expectation for NAB to halt it's decline and reverse back into the Wave 5 rising trend.

So the conclusion here is that NAB cannot meet a reasonable risk to reward ratio to incent us to take a trade at this point. We need to wait until the 50% retracement is breeched or the Wave 5 begins.

Cheers

"the increadible lightness of knowledge ..."

We are but a few kindred spirits separated only by the years ...

Cheers

"the non reality of Magritte & the GFC ...."

" the treachery of risk graphs"

Magritte - The Treachery of Images (La trahison des images, 1928–29)

AAPL Iron Butterfly 340/250/250/260 @ 21st April 2011

Cheers

"NAB - trespassers presecuted with vigour ...."

Two days ago on the 29th March we observed that NAB appeared to be at a crossroads with the current Wave count in a Wave 4 and looking to begin the downward retracement into the next Wave 5 low. But there were some danger sign.

NAB Daily - 29th March 2011

In the chart above we were watching to see if price would turn on the first short term ellipse, (yellow),  or go on higher to the next longer term ellipse in blue. As we saw in the previous post, price was strong and had exceeded the 138% Fibonacci retracement which was signalling that a Wave 4 was potentially in trouble.

Our concern in the above chart is that if the price movement is too strong and travels up into the space of Wave 1 then we are likely to get a wave count. By April 1st this is what has happened.

NAB Daily - 1st April 2011 - New Wave 3

As price traded above the Wave 1 low, the Elliott Wave recounted and went from the Wave 4 high into a new Wave 3. Taking a plot from the previous Wave 5 high show the MOB target for this Wave 3 high around $28 by mid July. The question is how practical or possible is this as a target, and secondly are we now in a sustainable Wave 3 or will the pattern revert to the earlier Wave 4?

A conservative short term target would be to buy some May $26.50 Calls if you consider that the momentum is to continue in the near term. If you look at the wider global markets, the DOW in particular has just broken out of it's regression channel indicating possible weakness. In addition, overall volumes have been thin and unconvincing as the US markets rose over the past two weeks.

The lack of strong volumes over the past two weeks, together with the price bias for PUTs at the moment, one might be forgiven if they stayed out of this rally on the off chance that it is close to peaking and any trade would not yield sufficient reward to risk ratio to compensate for the markets skittishness.

Cheers

"NAB - in the midst of an identity crisis ..."

Just on one month ago, (18th February), we looked at NAB which appeared to be topping out on a Wave 5 high. At this time we speculated that although the immediate chart for NAB showed an upward bias, the longer term weekly and monthly charts were still pointing down.

Since the 18th February NAB has indeed dropped significantly into a material retracement and as at the 20th March, it was finding support around $24.50.

NAB Daily chart  - 20th March 2011.

In the past, NAB seems to have exhibited a penchant for hitting a support, and if it stumbles around this point for 2, 3 or 4 days, then this seems to become a new bottom and the price turns from here.

In the chart above, we have this exact scenario around the $24 mark and the anticipation is that NAB would begin to rise over the next week. In fact this is what happened.

NAB Daily chart - 25th March 2011.

In the chart above,  NAB has maintained the support around the $24 level [A] which was also our previous Wave 3 target low [B], and begun a very convincing retracement for the next phase of the Elliott pattern which is a Wave 4 with a retracement target between the 50% & 62% Fibonacci target points [C].  This range is reinforced by the ellipse tool also targeting a level around $25 to $25.30 [E]

The objective will be to watch for the beginning of a new Wave 5 low. This will be indicated by the price breaking to the downside out of the regression channel [F] and then cutting below the 6,4 Displaced Moving Average. This should give a high probability entry point. Upon entering further PUTs to protect the portfolio's downside, a stop-loss will be placed at the high of the eventual high point around [E], where the stock turned down.

There are Three potential warning signs in the trade at present that we need to keep in mind. The first is that the price is getting very close to exceeding the red Wave 4 band which would signal that a lower Wave 5 is a remote possibility and that we may get either a Wave recount and this Wave 4 could turn into a Wave 3 and continue much higher or if the price retraces, the proposed Wave 5 low, has a higher probability that it would end in a double bottom around the level of the previous Wave 3 low [B].

The second warning sign is that the white long term ellipse target at [E], has not yet completed and is showing a higher price range above $25.50, and the third warning sign is that the 5,35 Oscillator, (below), which is below the price chart, is yet to retrace into the range of a 90% to 138% retracement in order to assist in confirming that the Wave 4 is over.

NAB Daily 5,35 Oscillator Retracement

In our case above, the Oscillator has quite some way to go before it is in the correct retracement zone. Now the Oscillator could retrace into this zone but in order to do so, price is either going to have to stagnate for a week or so or climb higher to push the Oscillator into the retracement zone. If the price goes higher it will invalidate the Wave 4 channels and potentially breach the maximum 68% Fibonacci level that I like to set as a maximum pull-back for a Wave 4. If the retracement is above the 68% level I think it is a good indication that there is something else going on in this stock and that we need to be alert to change.

So where to next ? This week is going to be crucial to assisting us determine whether NAB will breach the Wave 4 channels and recount the Elliott Waves from a 4 back to a rising Wave 3 or confirm the 68% Fibonacci level and begin the decline of a new Wave 5 low.

Seems NAB may have a slight identity crisis over the next week ....

Cheers