HEAD & SHOULDERS

Entercom Communications

05/02/11 09:19:34 AM

by Koos van der Merwe

An inverse head & shoulders followed by a head & shoulders?

Security: ETM
Position: Hold

Entercom Communications (ETM) gave an inverse head & shoulders formation that met its target (Figure 1). A look at the chart shows how it suggested a target of $13.52 (9.26 - 5.00 = 4.26 + 9.26 = 13.52). Now it is suggesting a future possible head & shoulders formation with a target of $6.38 (13.64 - 10.01 = 3.63; 10.01 - 3.63 = 6.38).

FIGURE 1: ENTERCOM COMMUNICATIONS

Graphic provided by: AdvancedGET.

The chart does show that an Elliott wave pattern rose to meet the high of $13.64, close to the target of $13.52. However, the abc correction that has followed should end within the fourth wave of lesser degree, which means that the lowest it should go is $9.65, the low of wave 4.

Falling to a target of $6.38, should the head & shoulders formation be true, means that the correction would exceed the 72% retracement level. That would then be wave II of a major bull run, unless of course my whole wave count is incorrect (see green count). This suggests that the share is in a wave 3 of wave III and appears to be confirmed by the relative strength index (RSI), which has given a buy signal. Of course, I would like to believe the latter has a triple-bottom formation, a strong resistance, but we must wait and see.

Should the price break below $10.01, then the H&S formation is dominant with a drop in price to $6.38. If not, and the alternate wave count is true, then we should see a rise to at least $12.18, at which point wave 3 will equal wave 1.

ETM is worth watching as a possible buy. However, should it fall below $10.01, then we could see a fall to $6.38.

Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

Address:	3256 West 24th Ave
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HEAD & SHOULDERS

Entercom Communications

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