We have a 5-wave sequence up. Time to sell. Ah, but you shouldn’t because things are going so well for this company. But that is exactly the point.
We have been wrong on this one, just for the record.
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CSIQ, Canadian Solar (on Nasd.), FSLR
Together with two other solar stocks we recommended selling this one back in March 6, 2014, pretty well a year ago to the date. It was at $41 at the time. Then just last month it hit the 62% retracement mark and had completed a textbook correction. WE were asleep on this one but did recommend buying FSLR, more on that later.
The beauty of EW, unlike nuclear physics, you do not need to understand the whole thing, all you need to do in many cases is recognize the last pattern for what it is. In this case a completed correction!. You also know that after a completed correction the stock must go up, most often to the level of the b-wave in the correction. In this case that is at about $40. That is quite a bit so you may not want to take the risk, then just assume that you will get a minimum of 38% of the drop or about $10 (which, by the way, amounts to a 50% return in a single month!)
So we looked at FSLR instead. Here is the chart;
Also please look at the previous blog that explains the present position much better. Here too we were asleep at the switch letting the first $9 slip by, but still we are up $12 on $49 which is 25% in less than a month. We are optimistic that this stock has a lot further to go but for the moment it is a little overbought looking at the RSI. But then the b-wave is at $72.
DAX, another take.
The Dax’s performance is absolutely fascinating. At the recent high of 11465 it was up 37% in 4 1/2 months. In a very crude way I have figured out that there were only three previous occasions where the Dax may have performed in a similar super bullish fashion. The little purple arrows, all equally long (but this is not a semi-log chart!) indicate where and when those events might have occurred. In every case it would have been a 5th wave ( but not always the same degree). In both the two previous occasions the advance is immediately erased! They are separately shown below;
Only the one starting in late ’99 and early ‘00 is comparable in duration and size (smaller in absolute terms but bigger as a percentage). It too appears to be a “thrust” out of a triangle and peaking just above the apex. Note that after that peak the Dax has it’s biggest drop ever, both absolute and as a percentage, losing roughly 3/4 of it’s value.
Will history repeat itself ? Mostly it does as otherwise pattern recognition would be a useless endeavour, which , perhaps , it is.
ANF, Abercrombie & Fitch
Then – Nov. 13 2011 – and now charts,
The B-wave. Here is a good example of the B-wave that seems to prop up everywhere. The stylized version was not followed tick by tick, it has taken much longer and the drop was more erratic but the main principle holds so far. Already the stock lost well over half its value since Nov. 2015 and we are not even close to our destination.