Colgate is doing every possible trick in the book to delay the inevitable. Even if we are a few dollars higher the story just becomes even more compelling. From the lows of $74 the stock has traced out a near perfect expanding diagonal triangle, always a 5th wave and always retraced entirely. There is even alternation between 2 and 4 as well a some degree of overlap, something that cannot occur other than in these specific structures. The puts should be even cheaper now. This favors the 4-5, 4-5 alternative interpretation  discussed in the previous blog.

Because this is the ultimate blue-chip stock it is good to keep a close eye on it. So far it has done mostly as expected even though just a few weeks ago it looked ready to go but then manages to regain it’s composure in short order. Here are the charts again now that we have reached $90.99;

This is the preferred count. It has a pennant, wedge, rising flag or “contracting diagonal triangle” as a 5th wave. It should peak exactly at $91 but my pencil really is not that precise. Furthermore a “throw-over” of a dollar or two is not at all unusual.What supports this count is the fact that wave 3 remains the longest, not a necessity but nevertheless the most common situation. It also fits the markets overall best considering they started moving down half a year or so ago. But there is a possibility that this count is incorrect:

Using Google charts for variety, a case can be made for a 1-2, 1-2 start which then has to end in a 4-5, 4-5 as shown. The overlap does not matter because it does not occur within the individual legs. The potential target would be $100, that is to the upper trend-line. I do not know which interpretation will prevail but I do prefer the top one. In the end, if you buy your puts as suggested you should profit quite a bit either way. The most logical target is $40!

$90 puts for Jan 2013 are going for about $9/$10. The stock moved $10 up and down during August.

In our view this stock is the ultimate barometer for what might happen in the US. The end point has been a little elusive, a few months ago at around $89 or so it looked pretty well complete. Then it went for a $10 quick round-trip, causing overlap that made it look like it was done, only to shoot back up to new highs. Here is the July chart again;

Since then the action was fast and furious;

So since that July high this stock has travelled the better part of $20. At $90 to $91 I have to assume that we are topping.