Definitely got this one wrong. It just kept going and going, but the last $30 or so up is just ridiculous and we now have perfect symmetry with the RSI not confirming. This is a sell. In my last blog I suggested the stock should not trade above $193, so far so good.
First a little look back to July 11, 2011; here is that chart (you can retrieve the entire blog using STJ in the upper corner);
We were , once again , fascinated at how well markets are able to almost perfectly recreate certain patterns without much regard to the “noise”. The first target, of course would have been about $34, much further down after that. Here are the updated charts;
The stock did exactly that. The low was at $33.54. My (educated) guess is that the first wave is complete and that we are doing 2 right now. This wave 2 could, repeat could, continue to say $44, the apex of a triangle. I am sure some of you will think that this count cannot be correct as wave 3 looks to be the shortest. However if you look carefully it will become clear that it is indeed the longest. Stay out! By the way, the p/e is still well above 30 according to Bigcharts.
The question is are we in wave 4 of 1, with 5 still to go to complete wave 1 (in black), or did we in fact already complete the entire wave 1 and are now in wave 2 (in blue)? Certainly the black interpretation is the more elegant one, but fortunately it does not matter all that much at this point as wave 3 was the lion’s share of the drop anyway so the proportion of either wave 4 of 1 or wave 2 are not that different. We have already retraced about 40% and are at a wave 4 level, a move to about 62% would not be negligible but certainly not tradeable for most of us. That is why we recommended getting out of longs the other day.
This market is like a casino and roulette is played without the numbers, just black and red and as a result it is a binary proposition, that cannot be controlled too well . This risk-on , risk-off approach does not leave much for error. You should stay short for the next few months as this market has a long way to go. In terms getting short again , or more so, the 62% retracement level is as good a spot as any, but we may not even get there.
We would sell for a few dollars of profit and will take the 25% or so. No idea what propelled this one so fast but it does prove that the worst sector rebounds the fastest. Maybe there is more in this but not worth sticking around to find out. This is a semi-log chart.
The previous entry was recorded under HMD.