This is a long and complicated analysis, but I’ve been giving it a lot of thought, and I will walk you through my thinking step by step. There is what I think is a terrific setup here. An “either/or” that both at least initially point in the same direction.
In this tweet, I identified the parallel channel that $PLUG is in and pointed out the risk it faced were it unable to break out of that channel. In the intervening time, the bullish wedge it has formed (with divergence) leads me to believe that it will break out after all, a development which has prompted this deeper analysis.
To avoid confusion, I have used two colors to segregate the bullish and bearish alternatives: green for bullish, red for bearish. In order to then refer to subwaves (since I lack additional colors), I will refer to their degrees, and in this analysis I will be referring only to two: minor (not circled) and minute (circled). I hope this will help you to follow along as I discuss the chart.
The Bullish Case (green stuff)
The move down from the January high to the May low retraced 78.6% (on the nose) of the strong rally from the March 2020 COVID crash low to the all-time highs. That is a very deep retracement and is consistent with a wave 2. To limit noise on the chart, I have not included the subwave counts for that green (uncircled) 2, but it counts well as a 5-3-5 zigzag, also consistent with a wave 2. So, if that count is right, then we should not take out the May low for quite some time, and we would expect to rally to new all-time-highs at some point, perhaps going even as high as the upper orange target box for the next wave. Furthermore, we would expect the initial move off the May low to be impulsive (on this count it would be green [circled] 1), and that wave does in fact look like a good, 5-wave move (the orange ellipse).
The Bearish Case (red stuff)
If the move off the January high is only the first leg of much larger 3-leg move, we would expect a counter-rally, followed by another decline. However, the area highlighted by the ellipse, since it is a 5-wave move, indicates that the proposed counter-rally is not yet complete. When we have a 5-wave move like that, we need a second one to go with it. So, if that price action in the ellipse is the first leg (red [circled] a) of its own 3-leg move (to red [uncircled] B), of a much larger 3-leg move (to the red [uncircled] C, then the bullish wedge we are in now could be the connector of that. In which case we would also expect a rally, though not as high as in the bullish case. I have placed two targets for that big red B. The lower target is where circled c = the length of circled a. The higher target just above it is the 50-61.8% retracement of the move down from January. And once we get up there, we should turn lower again and fall to one of two targets below: where big red C = one of the two fib relationships to the length of big red A.
Thus: in either case, bullish of bearish, given the nature of the rally off the May low combined with the bullish structure we have locally, a reasonable case can be made for a significant rally to any number of the orange target boxes. Since even the lowest target is 70% above us, and that is the most bearish alternative presented here, the risk to reward relationship is appealing. And since in any interpretation, we should be essentially done with either red circled b or green circled 2, stops anywhere around $20 to $23 should protect us in case neither of these two analyses are correct.
[UPDATE]: We have reached my initial long-term target for (red) c. I will need to monitor the price action from here prior to making a new call.
