EXC, Exelon Corp.

provides you with a green, red or amber light. They do not occur in the same proportions. Most often the light is amber meaning that there is no clear-cut predictive value flowing from the EW analysis. That is not a problem since you simple move on to a stock that does present a clear picture, but that approach does not work if someone asks you about a specific stock! That is the case with EXC, this is a utility, mostly electric but also in the gas distribution business. It operates in the Mid-West (HQ in Chicago) and is the largest operator of nuclear power stations. So right of the bat, utility=good and nuclear=bad, the yin and yang of investing. So going straight to the charts this is what we have;

Exc jan25 2012 mathexc jan25 2012 log

The charts are the same stock over the same time period. The one on the left is arithmetic and the one on the right logarithmic. Arithmetic charts have a tendency to exaggerate  the rise of a stock as it follows a parabolic line. The log chart, despite being less commonly used, actually gives a much better proportionate presentation of what is going on. With only the chart on the left, the prediction that this stock may drop to $20 seems preposterous. On the right chart it actually seems to fit nicely. Now the short-term chart;

EXC s jan 25 2012 

This looks a bit like MSFT, Microsoft. My best guess at this point is that we are in a triangle wave B, the A was the big drop from $90 to $34. The B will rotate a little longer around $41 and then wave will drop to $20 (or lower). One could buy the stock here waiting for the e wave to form. You could get lucky and the stock just keeps going, negating the bearish outlook. The only certain thing is that a stop loss should be used at $38.

By the way, regression to the mean alone would bring this stock close o the $20 level.