The stock may have peaked the other day at $89+
WTIC, West Texas and HOD
3 months ago (and before that) we warned that oil was going to take a beating. The chart above was unequivocal in its meaning – a very nice a-triangle b –c in progress. Here are today’s charts.
On the left is WTIC (continues futures contract for West Texas) and on the right I have added HOD (Horizons Betapro Oil Down 2x, the U is for Up). Being a bear ETF it should essentially resemble the other chart except that it should show twice the magnitude and be inverted.
WTIC targets, give or take, $85 which is where C=A, a normal and frequent occurrence. From about $115 to $85, if and when it gets there would be just shy of 30%. HOD, coming from $5 should therefore increase to about 1.6X 5=$8, where C is also equal to A. Paradoxically, should oil NOT drop that far, the situation could actually be much more bearish longer term. Also if these targets are met, it does not necessarily mean the end of the decline. A much more complex correction may be in the making.
Today’s drop is, prima facie, the result of the IEA (International Energy Agency ? )announcing a 60 mln. barrel injection into the system. Why now remains a little bit of a mystery considering the relative glut of the stuff. The US will contribute 40%, or so, to this endeavor by pumping the stuff out of it’s Strategic Reserves , another blatant example of a, probable illegal , use of assets in an attempt to distort market forces. Apparently this has been arranged for some time, no doubt with a little prodding from the Fed, always a champion of free markets unless inconvenient. Convoluted theories are already being presented to put a bullish spin on the situation.
MCD, McDonald
Back in February it looked like this one had peaked. It simple continued its rise and added , perhaps , another 2 to 3 dollars. The problem may come from viewing wave 4 as a triangle (there is a flash-crash entry on the chart that may not be real). If you shift wave 4 to the left, you need one more leg to complete wave 5 and that may well be what we have been getting. A drop to at least $50 is in the cards.
I listened to an analyst today who strongly believes this is the stock of the future. It derives only a small portion of its income from the US, most from Europe, and barely anything from China, but that is coming. As a very good reason to buy ,he mentioned that the company had measured a reduction in the time it takes to serve a hamburger from one year to the next. 6 seconds and that this represented 6x 1million on the bottom line. Being able to measure is not the same as being in control. Time will tell.
IFF, International Flavors and Fragrances.
This is a 5bln cap. company that is, as the name suggests, involved in specialty chemicals. It earns a dividend income of about 1.8% and presently trades at a p/e of 18. Here is the chart;
Everything about this chart points to a large “flat”, that is an A-B-C where the legs are about the same, here successively bigger, without the stock making any headway. The typical subdivisions are a-b-c,a-b-c,1-2-3-4-5. We just started 1 of the C wave. This scenario would ultimately result in a loss of about 60%.
There is an outside, very improbable, bullish alternative (in red) that views the recently completed up-leg as wave 5. Even in that bullish interpretation a loss of 40% is still a logical outcome. Both can be avoided by selling now.