This was back in June. We had called the peak a few months earlier and the stock had completed wave 1 down and wave 2 up. It was around $105 just shy of a 62% retracement and a 4th wave of previous degree. Here it is now;
As anticipated, it did go a little higher but then dutifully started wave 3 down. It has lost 27% in wave 3 alone. Longer term the target is much , much lower at $60 or so;
Back in January as the stock peaked at about $65, we came up with this chart for TCK. The old highs had been exceeded and the whole things looked like and smelled like a B-wave. If not ,it would be a 5 wave sequence. In both cases the stock should drop to around $32 initially. Here is where it is today.
We are at $35, a loss of $30 on $65 or about 46%. Look for that to become 50% at it drops further to the level of the B wave in the larger B-wave rally. Note that this stock was on most advisors buy list. I do not believe there was a 5-wave sequence, but the jury is still out. If indeed this was a large B-wave rally instead the stock could make new lows even if it pauses at around $32.!
Almost 3 years ago we got lucky with this stock by recommending a sell at $400 (about 61.8% retracement) and buying back at $275 a month later. We prefer to be smart but will take luck any time. Since then the stock has spent 2 to 3 years doing relatively little, the amber light was on and there was nothing more to say. Only once before has this stock spent so much time doing so little (‘03 to ‘06), so, like a volcano , it may come to life at any moment, most likely to the downside! It has been hugging the lower boundary line for almost a year now and has done what it should in terms of retracement. Time to get out or at the very least put in a stop at about $375.
This company is run buy very smart management (Mr. Watsa) , known for their willingness to contemplate the bear side which would normally work in their favour. But they are also an insurance company and as such are experiencing difficult times due to low returns on investments. According to statements made by Mr. Watsa they now fear a deflationary environment and are also concerned about a Fed. that has effectively made itself irrelevant due to no more ammo and, are very concerned about the Chinese real estate bubble. So the stock could actually go up but for the moment the risk seems to be to the downside.
The DAX and so many other indexes have been more or less suspended for the past week or two while we await the outcome of the Greek implosion and the American deficit reduction and jobs bill progress. These things always take longer if you are waiting for the outcome. With this in mind an earlier thought with respect to the DAX keeps resurfacing.
The drop of roughly 2600 points from the may high to the Sept low is not over , but we may just get a slightly bigger rebound. The 5th wave of 3 appears to have been a wedge, which normally retraces entirely. This could mean that the present wave 4 could go another leg higher. A 40% retracement of wave 3 would require about 1000 points and this would equate nicely with the start of the wedge , the upper channel line and the 50-day moving average.
After that, as discussed, wave 5 could be precipitous or just wave 5 of 1.