Crazy volatility aside, the overall pattern in Walter Energy (WLT) argues that all of the action off of the September 3 high at 78.74 represents a maturing corrective period which when complete should resolve itself into a new upleg that propels the stock above 79.00-80.00 towards 90.00. Next upleg should coincide with an upside breakout in the China equity indices, which would benefit this industry.

Only a decline that breaks and sustains beneath 72.50 will begin to compromise the pattern, while a decline that breaks 71.00 will invalidate the bullish scenario altogether

 

Mike Paulenoff is a 26-year veteran of the financial markets and author of MPTrader.com.