We are still ultimately looking for a low in the $50 range but at this moment in time we would rather be long than short. For one thing, this whole drop could have been a double zig-zag a-b-c X a-b-c. If not there are clearly 7 waves down so far and that cannot be a 5-wave affair. Whatever the case given the waning momentum, the RSI and MACD and also the now widespread recognition that there is something wrong with this stock it is time to go long with a tight stop.
So we hit the $20 handle today, which was our target as per the previous blog. A dollar or two is still a distinct possibility but it is not a good risk/reward proposition. In fact a bounce to $30, from here or a little lower, is the most probable EW interpretation. That would present a 50% gain and you are buying well below the original issue price or where the stuff started trading. For citizens of the World these are must-own-cameras as you go down Piz Nair in St. Moritz after your swim with sharks above the Great Barrier Reef in Queensland.
The usual the, Oct. 9, 2015, and now charts;
Just a quick update. On the left our view as of the beginning of October, Oct. the 9th to be precise. Since then we have dropped about 1000 points. THAT IS NOTHING! We may now be at the start of wave 3 which could, repeat could, easily become a 4 to 5000 point decline or more and that would still not be the end of it. It could happen rather slowly, or very rapidly and perhaps even not at all. Time will tell. Below is a possible big picture;
An example of a stock that has gone down this road a little further would be BTU or BHP which is shown below;
Billiton is, of course in the commodities biz, but then so is Canada. The best way not to play this if you are a lender, is to grow your business like crazy at this time , preferable using agents that care less about your continuity. A 10 mln loan may only be valued at 2 mln once this is over.
Then, July 24th, and now charts;
Using the Bigchart we estimated a bottom at about $7 using three different metrics. The actual low was at $7.39. From there it nearly doubled and, so far at least, the bounce looks a lot like a simple a-b-c, that is a correction. A new low might still be forthcoming.
Markets have an uncanny tendency towards symmetry and regardless whether this is a 5th wave in a diagonal or a 5th wave in a normal sequence, for symmetry to apply the stock should drop $1,13 below this last low which would bring it to $6.26 Don’t bet your last dollar on it but do expect another new low.