CMG Triangle

The above chart shows a possible 4th wave triangle in CMG in development with waves d and e to go to complete the triangle. CMG has been a leading stock in this rally with its bear market low in November.

We can draw several conclusions from the above chart: 1) the correction in the broader markets will likely take more time, enough time for the triangle above to complete (2 weeks?), 2) the current correction in the broader markets is not likely to be severe and may be completed soon, and 3) after the correction is over, leading stocks will likely make new highs.

I would not make the above statements based on CMG alone, but after scanning through about 400 stocks this week, I have seen a plethora of triangles. I have seen this happen before. Triangles start showing up in abundance before the last move of a rally, usually. I will be trading these triangles. The reward/risk ratio is good and the probability of hitting the target is high. Once the triangle comes to completion, I will revisit the setup and target.

As a side note, when a clearly triangular shaped formation of several weeks duration is being formed on the chart, and the stock breaks out above the wave b high before waves d and e complete, it can be extraordinarily bullish. Please look at WYNN in November 2006. What at first appeared to be a triangle turned out to be waves 1 and 2, and WYNN gained 55% from its wave b breakout high. I missed that trade waiting for waves d and e which never came. I have seen this type of behavior since, so it is worth noting.