The stock delivered the $2+ gain as promised. It will probable go higher, we simple don’t know with any degree of certainty. The RSI is topping but could stay there for quite some time. In the mean time HNU is up almost 50% from its recent lows. Same story.
This chart is from our December 19 , 2011 blog. It shows the two possible outcomes that could reasonable be expected at that time. Before that we had tried to buy the stock but had chosen a level that was just a little bit too low and was never reached. Here is what happened;
As you can see,the stock went exactly to one of the two targets, the preferred one given the valuation, at just over $21. But that does nothing for you if you are not in the game. Being reckless is not good but being too cautious is not very helpful either. So where now?
The best guess at this point in time is hat the stock is making a very large A-B-C correction from the $70 high. In this case the structure should unfold as a 5-3-5 A-B-C. Very often, but certainly not always, both legs will tend towards vector equality which essentially means that the longer it takes the smaller the amplitude. The purple arrows give a rough idea how this might play out. It targets about $8 or so and should take another 6 months to complete. Rumblings that Moody is contemplating a credit downgrade, by no less that 3 notches, may precipitate the process. As always , time will tell but we missed an easy double.
Just a quick update. It is an educated guess more than anything else. Looking at the bigger picture the overlap that clearly occurred suggests that we started this (wave 3 of C ) with a series of 1-2’s. Today , with 250 points down at this time we could be in a 5th with of 3 , implying a rebound in the next few days. Overall there is still a long way down and consequently any early attempt at counting this thing is mostly academic.
For the first ten or so years this stock did nothing but drop in value un till it hit a low in ‘99. It lost quite a bit, 80+%. Then all of a sudden, for no apparent reason, the stock behaves like a moon rocket and gains 50X in about 5 years. The question now should really be, “What would happen if it regressed back to the mean”? For the fun of it I have draw a line where the “mean” is. So far the stock has done as expected (see previous blogs). Should it continue to do so the C wave could end up becoming a double or even triple zig-zag.