CL , Colgate Palmolive update, see also April 6 blog

 

cl may 2011 cl may 2011s

Colgate was up more than $2 today. As expected it is increasing the speed at which it is looking to get to the ultimate target. As indicated earlier two counts are plausible. Most elegant of the two is the notion that we are in a 5th wave wedge, now in its 7th year. This is because of the overlap that has occurred. A very plausible alternative would be a 1-2, 1-2 start which then requires a 4-5, 4-5 finish to complete the 30 year 5 wave sequence.

There may well be good reasons to prefer one count over the other but it is purely academic as BOTH counts call for a fairly drastic drop at the very least to $55, but more likely $45 or even $35 where the 62% retracement level lies. By the way, this is not a bearish call, just one that recognizes the normal ebb and flow of stock cycles.

My target for a top was about $90. Now that some time has gone by – a month – a more accurate guesstimate would be $92. At a rate of $2+ a day we could be there within a few days!

cl options may

In the mean time the 85 strike 2013 put is moving towards the expected level of around $7, in fact, should the stock move to $92 or about $5 up from here with a delta of about 0.5 (we are at the money) the ask could drop another $2.50 which would bring it to $6.40 all things being equal.

Some may wonder why , if you expect the stock to go up by about $10 or a little more than 10% you do not recommend buying it. The simple answer is that I do not like playing 5th waves from the long side. The new high may only be marginal and the risk is at its highest!