As anticipated (see Dec ! blog) this stock has been breaking down and is now about $10 cheaper. The “rising flag” pattern at the top is highly reliable, look for another $20 at least!

They just reported today and earnings are down by almost 1/2. Under new economics 101 this is no doubt something to applaud and therefore the stock will go up. Old fashioned EW analysis suggest the stock has peaked and a huge drop is right around the corner and long overdue. Here is the chart;

The 5th wave in this sequence is a “diagonal”.  It is the only structure that can have overlap and most often does. It is always a 5th wave (or C) and occurs at the end of the ride. In English it is a rising flag, pennant and half a dozen other things. I have put the model next to it so you can draw your own conclusion. Just a hint here, normally these this fall back to at least the base, here at $35. After that 50/62% or whatever else could follow.

See also my previous blog of August 5th 2011 where this stock was predicted to go to about $62 and then fall. It did a few extra dollars but the may point was dead on, so far at least.

A year ago I thought I had this one nailed down. Since then it has not budged, never exceeding the $60 level. EW is not very helpful in terms of timing.

Looking at it again , I am even more convinced that this one is going into the tank. The 5-waves up are clear even if different little variations from what is shown in the chart could apply. But the outcome is perfectly clear. Either the irregular B-wave that took the stock slightly above the top is correct, and the subsequent moves are a 1-2. Or the top was not in yet and we have been doing a wedge for the past 5 years, see details below;

Personally I favor the idea that the top is already in and that we are in wave 3 down. In practice it does not matter much as it is practically certain that it will not trade above $62 and soon (a year or two) it should trade at about $34. If nothing else writing a few call options with a strike above $62 and a reasonable time to maturity should be very productive.

See also Colgate CL which is in a virtual identical position.

Sobeys is following the script precisely. This should continue if the count is correct. Today the dividend is increased and the news is generally speaking good but not outstanding. Nevertheless the next move should be down in a 3d wave. It is depicted without regard to magnitude and is simple meant to show the structure that should be anticipated.