It has always been our contention that Colgate is the real canary in the coal mine. We got it wrong the other day thinking it was game over, instead the stock climbed almost two bucks. But then today it reversed down almost four dollars. This happens not surprisingly at a point in time where the C wave is precisely equal to the A wave of the larger counter trend B – wave rally. Measure it yourself if you doubt it.
Today’s almost $4 drop, unheard of for this blue-chip stock, tells us a lot. It tells us that not only is the Fed. incompetent but, and this is the real revelation at this time, it is impotent, plain and simple. Perhaps the market and the moronic advisors that serve it, is catching on.
Concerning Cl, it should drop to $70 for starters, a lot lower after that .
CL
Colgate is doing every possible trick in the book to delay the inevitable. Even if we are a few dollars higher the story just becomes even more compelling. From the lows of $74 the stock has traced out a near perfect expanding diagonal triangle, always a 5th wave and always retraced entirely. There is even alternation between 2 and 4 as well a some degree of overlap, something that cannot occur other than in these specific structures. The puts should be even cheaper now. This favors the 4-5, 4-5 alternative interpretation discussed in the previous blog.
CL
You may want to enlarge this. I ran out of colors so there are only 17 countries and I took a good deal of artistic license putting this together so it is far from perfect. Colgate-Palmolive is not a country but it might as well have been. On average the markets, at their recent lows (not today!), were pretty well at the level of the b-wave of the a-b-c counter-trend rally that retraced an almost precise 62% of the drop of 2008/2009. Expectations now should be focused on wave 4 of previous degree at about 700. The timing would be about a year from now, a little less so perhaps July, 2012.
Colgate should break down any moment.
CL, GDOW
Because this is the ultimate blue-chip stock it is good to keep a close eye on it. So far it has done mostly as expected even though just a few weeks ago it looked ready to go but then manages to regain it’s composure in short order. Here are the charts again now that we have reached $90.99;
This is the preferred count. It has a pennant, wedge, rising flag or “contracting diagonal triangle” as a 5th wave. It should peak exactly at $91 but my pencil really is not that precise. Furthermore a “throw-over” of a dollar or two is not at all unusual.What supports this count is the fact that wave 3 remains the longest, not a necessity but nevertheless the most common situation. It also fits the markets overall best considering they started moving down half a year or so ago. But there is a possibility that this count is incorrect:
Using Google charts for variety, a case can be made for a 1-2, 1-2 start which then has to end in a 4-5, 4-5 as shown. The overlap does not matter because it does not occur within the individual legs. The potential target would be $100, that is to the upper trend-line. I do not know which interpretation will prevail but I do prefer the top one. In the end, if you buy your puts as suggested you should profit quite a bit either way. The most logical target is $40!
$90 puts for Jan 2013 are going for about $9/$10. The stock moved $10 up and down during August.
CL
In our view this stock is the ultimate barometer for what might happen in the US. The end point has been a little elusive, a few months ago at around $89 or so it looked pretty well complete. Then it went for a $10 quick round-trip, causing overlap that made it look like it was done, only to shoot back up to new highs. Here is the July chart again;
Since then the action was fast and furious;
So since that July high this stock has travelled the better part of $20. At $90 to $91 I have to assume that we are topping.
CL
Colgate, as discussed before looks like it is topping in a 5th wave wedge. This it has in common with IBM;
Whereas CL has a contracting diagonal (wedge) IBM has an expanding one. IBM when we still knew what business it was in, experienced a 25 year period during which the stock traded down. That 25 year pattern could possible be a “megaphone” which would , by necessity make it a wave 4. Even then the stock is topping;
Typically the stock does not trade much above the upper boundary of the “megaphone”, which is about where the stock is now. A sell however you slice it.
CL, IBM
The stock may have peaked the other day at $89+
CL
Then and now ;
Now that we have a little more detail it is starting to look like the ultimate target is about $92. Presently the stock is at about $89 and change , so another $3 to go. On the options that should reduce the price by about $1.50 to $5.70 bid/$6.70 ask, approximately where we anticipated it to be a while ago;
Once again I do not for a moment pretend that this is the option that one should chose; all choices throughout the range of strike and time should be priced accordingly.
CL
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