CM , Canadian Imperial Bank of Commerce.

Earlier this year, on the 21 of March, we opined that this bank would not go much higher and should in fact start a very steep decline.Here is the chart at that time;

CMmar22 2011

At the time the stock had traded as high as $83.31, subsequently it managed to eek another dollar  but then did precisely as expected, dropping a little over 20% to, almost $67, a few dollars shy of the then suggested target.

cm aug 31 2011

Today’s earnings were good and that may have given it an extra little push, but the stock might have completed a 5-wave down sequence just a few days ago. The bottom part is a little muddled but with the benefit of hindsight it looks like wave 4 was an irregular flat (on the day the US was downgraded. Then followed a wave 5, more or less equal to wave 1. Waves 2 and 4 alternate and given the proximity to the expected target this makes the most sense (probable with a lot of other stocks as well!). What this means is that we are now correcting the entire wave 1 down, typically one should then expect a 62% retracement, to wave 4 or wave 4 of 3 etc.etc. and that is what is happening. $77.5 would be an ideal target and then the stock should drop, and do so faster than during the last 6 months (see previous blogs).