Hamilton's E-Wave Analysis

J C Penney, revisited

jcp aug 26 2013 b

First the big picture. Around the turn of the century (not this one but the previous one), this company was founded by a fellow by the name of James Cash Penney. So this retailer is not in any way connected to “dollar” or “dime” stores or their ilk. It is more comparable to a Sears and often finds itself as the anchor store in malls in suburban areas. This company had Mr. Ackman of Pershing Square fame on its board un till recently and created a “poison pill” structure to fend off unwanted advances. Presumable there is a real or perceived threat of some sort.   Applying our most favourite mantra – Buy Low / Sell High – to this stock, tells you at a mere glance that buying now is a lot closer to the bottom of  the range, from $10 to $90, than to the top. Also if you do not understand the stock, rest assured that you are not alone. But one thing is perfectly clear given the magnitude of the swings in price in the past 20 years, and that is that anything is possible! Even likely if we look at the details;

In EW parlance this is a diagonal (contracting triangle). In normal English it is a wedge. One chart is normal, the other semi-log. Also the time frames are not the same. The wedge is clearly visible in both. The nice part about this structure (and all others) is that the 3d wave cannot, ever, be the shortest. Wave 1 is from $32.55 to $15.69, or $16.86. The third wave is from $23.10 to $13.55, or $9.55. The 5th wave, so far, from $19.63 to $12.34 or $7.29. The furthest it could possible go is to $10.08, but that is using the extremes. Going by the trendline $12 would be the lowest possible level. The shorts are still at about 20% of the float.

      The initial target is at , almost, $20.00, the top of the triangle wave 4 of this wedge. Next target is at $22.50, again the top of a triangle using a less likely different count. Next is $30/32 which constitutes the base of this wedge. By the way, almost all are retraced all the way to the base and usually quite rapidly. Essentially this stock is open invitation to doubling your money in a very short period of time! Things can always go wrong so by all means put in a stop at $11.