My 01/19/21 blog “Consumer Staples Fund – XLP Update” noted that this exchange traded fund symbol (XLP) had two Fibonacci support points at 63.34 and 63.56.
The daily XLP chart courtesy of Trading View shows its current situation.
On 02/26/21 XLP has gone slightly below the lower Fibonacci target and reached 63.28. However, the daily RSI has gone below the level it reached on 10/30/20 while price is higher, this implies XLP could at least reach 61.49. Additionally, so far only the lower daily Stochastic line has reached the oversold zone – there’s room for lower prices.
My 10/11/20 post noted that XLP had the clearest Elliott wave count. Since then, the count has become less clear. The rally from 11/23/20 to 12/18/20 labeled as Intermediate wave (5) could be a truncated fifth wave. In this formation the fifth wave fails to exceed the termination point of the third wave. Truncated waves make Elliott wave counting more difficult. They cannot be predicted and increase the number of alternate counts. Usually, they aren’t discovered until long after they’ve formed.
The supposed truncated fifth wave illustrated is a perfect example, currently the decline from Intermediated wave (3) could also be Intermediate wave (4) – three months after the supposed Intermediate wave (3) top.
Further clouding the picture is that the supposed Intermediate wave (5) could be an Elliott wave Ending Diagonal Triangle (EDT). The supposed EDT has the needed choppiness; however, it could also be a complex correction of 11/16/20 to 02/26/21 decline.
An important downside target is 60.70, which is the peak of the supposed Intermediate wave (1). In a standard Elliott wave impulse pattern, wave “four” does not overlap the territory of wave “one”. If within the next few trading days XLP reaches 60.70 it could open the door for a move back to the March 2020 bottom.