Sobeys is following the script precisely (see March 2010 blog). It has completed waves 1 and 2, or A and B, and is now diving into wave 3 (or C ). First “logical target is around $40.

Our call in Aug. and Nov. of 2010 worked out well sofar (see previous blogs). This one could not go up further than $60 on good news, now it is probable going to do a little bounce on so so news. This should continue thereafter to at least $40.

A dollar or two this looked like an excellent short. Now that a few months have passed and the stock is worth a few dollars more , it looks like an even better short The big picture from last August, to refresh;

More time was consumed but it has traced out the stylized top much better this time. The $60 is a good level to go short.

Here are the long and short term charts for this stock.

First of all, there is absolutely nothing wrong with this stock except , perhaps , the somewhat arrogant name. Essentially it is a food retailer with a home base in Nova Scotia that has been expanding towards Ontario etc. Perhaps because or as a result of its home base it has pretty good fish. Financially its P/E is a respectable 13X or so. It is a sell.

From the long term chart it is clear at a glance that this stock has done extraordinarily well, and has done so – arguable – in a clean 5 wave move. Two good reasons to sell. Furthermore, as is clear from the short-term chart , the rise from the initial low after that top, is a very clear symmetrical a-b-c which is the signature of a B-wave within an “irregular flat”. In this pattern the B-wave (itself an a-b-c) rises above the original top (it did at $57.45) and then the stock drops to below the initial low (< $35 ) and sometimes ,with a fairly large margin, more (to $25?). At today’s price that would be a 40%+ return, probable within the year. If that is not convincing, it is also a “double (or triple) top, another powerful argument.

For comparison purposes I have added a chart of Merck MRK, from ‘99 to ‘03. The stock had the same pattern with the irregular B-wave after a top. At the time this was a favorite bluechip pharma stock that was on everybody’s buy list. In the end it dropped to about $20.

So how certain is this? Provided the stock does not shoot up immediately I would think that chances are very good that this is going to happen. As always, ask your broker and if he/she disagrees the odds are even better.