Jun 04

Air France Flies to its Psychological Resistance

Air France-KLM (EPA:AF) rallies on Wednesday session over 10% boosted by the investor’s confidence that the worst part of the pandemic crisis has passed.

The French-Dutch airline, under the Elliott wave perspective, reveals the bullish sequence as an incomplete impulsive movement that calls for further upsides.

AF, in its log scale hourly chart, exposes the bullish movement that began on May 25th when the price found fresh buyers at €3.559 per share. The incorporation of new market participants prompted Air France to surpass the upper line of the descending trendline that connects the end of waves (ii) and (iv) of the Minuette degree labeled in blue.

This price and RSI upward breakout provide us a double confirmation of the upward change ob the market bias from bearish to bullish. In this context, the rising progression of the RSI reveals the top of the first wave of Minuette degree in blue at €4.509 per share.

Once the first impulsive movement was completed, the French-Dutch airline’s stock price began to move against the first move as a corrective structure. Once again, the RSI oscillator provides a clue, as the bounce at level  of40 confirmed the end of the corrective movement.

On the other hand, the ascending channel traced from the origin of the first impulsive movement to the end of wave (ii) in blue and projected at the top of the wave (i), helps us to conclude that the third wave of Minuette degree still has room to continue advancing. Simultaneously, the narrow range of the correction developed by Air France leads us to foresee that the third wave could be the extended move of the upward cycle.

In the short-term, Air France faces the psychological barrier at €5 as the first resistance. The second resistance is located at €5.588 per share, which confluences with the top of wave ((b)).

In conclusion, Air France should continue moving mostly upward in the following trading sessions. Considering that the second corrective move was a simple correction, the wave (iv) in blue should be a complex corrective structure. Finally, once the price action completes the upward five-wave sequence, AF should develop a corrective move in three waves, which could provide an opportunity for new entries to the long-side.