Olam International Technical Analysis
We continue our review of share price of Olam International from our previous Olam review on 22 Dec 2012. In that review, our analysis on Olam pointed to further upside to a target range of 1.70 to 1.80. Olam’s share price has went as high as 1.72 before turning down a bit to 1.665 before closing at 1.68. Below is the daily chart of Olam International. In this chart, we follow the Elliott wave counts to show the direction going forward.
The recent move can be traced out as a flat corrective pattern as highlighted in the chart. Flat corrections take the configuration of a 3-3-5 and I believe that Olam share price is at the final phase of the flat correction. There could be one final leg up to 1.80 region to complete the correction. The volume is diminishing quickly and that poses a risk for further upside.
The question now is what will happen after the correction is over. Well, there are two possible scenarios, one bullish and one bearish. The bullish scenario is that a shallow correction takes place to the downside as described in the below chart and Olam International rises further to the upside. This scenario would need to be backed by strong volume as it would need to break through a long term trendline as well as the neck line of the head and shoulders (in red).
The bearish scenario which looks like the more likely one is that Olam International continues its downtrend reaching for the bottom trend line of the downtrend channel. Recall that the target for the head and shoulders is 0.91 and that is ultimately where the share price would be headed to.