Wave patterns are repeatable. Here we take a look at a setup which is almost identical to the OMX Stockholm Index chart. In the period October-February we observed the development of two five wave counts in Franklin Resources (BEN:US). A sharp single day run on October 2 marked the beginning of a new up trend. With overlapping moves price traced out five waves and finally closed below the 0-4 line on December 3 indicating a sell signal coupled with bearish RSI divergence.
Following the sell recommendation Franklin Resources shares declined in a five wave structure by over 23%. Only two days after the February 11 bottom, price gapped up and broke above the down sloping 0-4 line producing a buy signal within a RSI divergence context. This pattern can be easily spotted at important market tops and bottoms and often presents low risk trade opportunities.