FFIV's recent action seems pretty constructive. At first glance, one's tempted to refer to the pattern shown on chart 1 as a Cup and Handle. However, the cup isn't U-shaped enough for comfort. Fortunately, the inverse Head-and-Shoulders formation is legitimate, and so is the Elliott wave structure that sports a five-wave impulsive look.
Chart 1. A 5-wave rise in FFIV in the backdrop of an Inverse Head-and-Shoulders pattern.
As far as the count is concerned, wave 3 achieved a size of
2.764 x wave 1, a common Fibonacci relationship among these two waves. Now I'm expecting wave 5 to reach and slightly exceed $129, achieving a size of
0.764 x [waves 1 + 3] (i.e., net distance measured from the start of wave 1 through the end of wave 3). Interestingly, this 'ideal' landing zone for wave 5 perfectly coincides with the 78.6% retracement of last year's more than 50% haircut. With that being said, and given the overnight weakness, it would be unwise to jump in with both feet, not to mention it's usually enough for the fifth wave to exceed the high of the third to be considered technically complete.
Once wave 5 is confirmed, I expect the stock to stage a pullback with the overall market, targeting the [$100 - $110] zone where it should be bought and held until it reaches at least $170 or takes out protective stop (TBD), whichever comes first.
Let's wait and see what happens next.
Trade Well,
Peter