Last May when the stock first reached $14 it was suggested that one step aside as the easy money was made and the stock could drop to about $7. Here is an update only for those that are interested in EW! Enlarge to read!

The blue was the original thought. It is an a-b-c as a minimum to get back to the top of the diagonal triangle that had preceded it. A drop back to the b wave is dead normal in that scenario hence the $7 target. Notice that a and c are of about the same size, about $7 each, and have similar structures with little triangles in the 4th wave position, a frequent occurrence. This is still a probable scenario but not the only one.

   The ideal target of $16/17 was never reached so it is still possible that we have to go one higher. The most elegant count to allow for this possibility is the green one. We just completed wave 4 and are already on our way up, or wave 4 will develop into a triangle first and then we move up. As wave 3 is slightly shorter than wave 1, and as wave 3 cannot be the shortest the maximum for this scenario is < $17. Breaking the channel makes this a low confidence scenario.

   Another possibility is (in pink) is that we had 5 waves into the high. This would itself be a first wave for the next major bull market. Not implausible considering the stock did drop to below $1 and has survived. As first waves are typically retraced quite deeply, often more than 62%, the $7 target is even a little optimistic but very realistic. Wave 2 should then take the form of two down legs with an intermission in the middle, i.e. an a-b-c. This seems to be the case and if c=a we would get close to the $7.

Putting all of this in the blender, the best thing to do is stay on the sidelines un till we get to $7 or one of the other scenarios becomes compelling.

Last time we suggested that Ford had done as much as one could reasonable expect, which simple means that you go either neutral or short. We were a little early as the stock managed to make a marginally, very marginally in fact, higher high a month and a half later. Adjusting the count accordingly we put the TOP at the latest high. From there we have either completed a wave one down followed by a wave 2 correction of about 60%. Alternatively wave one is not even complete (there is no overlap so that possibility remains open ) and we are now in an incomplete wave 5 of 1. Either way the stock should trade down to the $7 level or so.

Today the TSE met the 61.8% retracement that we have been waiting for for so long. Actually, by coincidence the S&P 500 did pretty well the exact same retracement. A few ticks here or there is always possible tomorrow or Friday but we like to take our que from Ford. As you are aware we had a potential to $14/15 where wave 4 of previous degree resides. Here is the chart;

Again on the basis of the diagonal triangle the stock needed to go at least to $9.60, beyond that the 4th of previous degree  at $14+ was a logical target. We are there either by way of an a-b-c correction (implying Ford is still going under), or by way of an initial 5 –wave move for a new bull market. What now. In the most positive scenario , where this is a new bull, expect a pull-back to the triangle $11 and then to wave 4 at $7. Wave 2 could and usually does erase at least 62% of the initial impulse which would take us to around $6. In short, if still in waiting for the last possible dollar is not recommended. This despite Moody’s late credit upgrade. Ask yourself if you are a contrarian or just another lemming, when the stock was at $1 nobody would touch it, now at $14 + it is second best to sliced bread, chose your own poison.