We had an $87 target well before it got there and are now looking for $62.50 as a minimum. See previous posts for a better look at the triangle that underlies this prediction. The stock has now fallen to $76, about $11 or nearly 13 % below it’s recent peak. The RSI and MACD both suggest a little rebound soon but this downward climb is not over.

See our previous blog of exactly one month ago. We predicted that the stock would peak at $87 or so. Well it did. Here is the chart;

It accomplished three things. It double-topped precisely at the level it reached three times back in ‘07/08. The thrust from the triangle is precisely what the triangle measures and the channel contains most of the rise since 2009. Again , our minimum target is at $65 so if not out already sell now.

Here are the usual then – December 2012 – and now charts;

Part of the prediction at least was correct. The question which remains is whether or not this is a B-wave (a-b-c X a-b-c) or a 5th wave. In the former case the triangle, which is clearly visible even if one cannot tell it’s exact size, is the b in the second a-b-c. In the latter case it would be a wave 4 in a 5 wave sequence. $87 or so (it has already reached $85) would be about as good as it gets, considering the double top and the triangle measure. We would sell here.

To put the growth of this stock in perspective below is a longer term  chart from the G&M.

The count shown, arbitrarily, is that of a 5th wave even though we prefer the B-wave as it “fits” the big picture better.

On the left is Royal Dutch, one of the larger integrated oil companies, just like Chevron which we think is a sell because it has so out performed all the others and is totally uncorrelated to the stuff (oil) itself. Both are shown on a relative basis (relative to the chosen starting point!) in the chart on the right. Royal Dutch appears to have completed a triangle but unlike Chevron would still have to make the thrust upwards to complete a 5-wave sequence. So why does one look like it is ready to go down and the other ready to go up? As always the answer is in the details;

Triangles must consist of 3-wave legs (not 5!) All legs could be said to meet this requirement except the first which is better viewed as a 5-wave leg, despite a single tick failure.(Also the c-leg from the beginning of 2012 to June is probable a “diagonal”, so despite the overlap it still should be viewed as 5 waves). That then becomes wave 1 down followed by a rather clumsy a-b-c correction back up as wave 2. If correct we are presently in wave 3 (at the beginning) and both stocks are aligned. The RSI and MACD seem to be supporting this outlook.

A nice, market-neutral, trade would be to sell Chevron and buy Royal on a 1 for 2 basis, roughly (see spread below). Just don’t use warrants or other option-like instruments as that does not always work out that neutral as the guys at Sprott & Flatiron can attest to.