MS

MS, Morgan Stanley

Hamilton

One of the few left standing. It is smaller than GS but famous for it’s bond trading capabilities. It looks like it is a death spiral, just like Goldman, but the chart actually looks rather promising;

MS oct 2011 MS l 2011

First of all, there appears to be a 5 wave down sequence as should be expected from all C waves. If it is or is not complete, is a different matter. The lows of March 2009 were at around $9 and so far we have gotten below $12 already. We know that at $10 or below there will be a lot of buyers so something is bound to happen around that level. The most interesting part is that the 5th wave of wave 5 seems to be developing as an expanding diagonal triangle, which , in English, is a wedge that has ever increasing swings in the 3 down legs and two up legs that it should have. It is an exhaustion pattern, meaning things have gone too far too fast. It only occurs as the last wave in a sequence and virtually always is retraced in full, in this case that equates to $18. Furthermore it does this fast!

The question that remains, is this wedge complete. The simple answer is maybe, maybe not. To play it safe lets assume it is not complete in which case one more dive to roughly $10 is still in the cards. If you buy it there you could make an 80% return in a matter of months. Use options if that fits better.

Below I have added the chart from July 2011 ;

ms july 2011

At the time the stock had already dropped to around $20. It has gone further than expected but the pattern is still perfectly valid (as perhaps with GE)

PS. It could be that this stock goes to zero, but we would still have to get a wave 4 and then 5. This “wedge” would then be at the end of wave 3 as it has to be at the end of something. Given that wave 3 by that time will be from $30 to $10, a retracement to $18 would still occur as wave 4. So provided you sell at $18 things should work. If the stock does not get to $10 and rises from here, al you have lost is an opportunity.

GE and MS, when patterns are crystal clear.

Hamilton

EW contains a lot of ambiguities which is why 2/3 of the time you are really not sure at all what might happen. To put it in other words, sometime the light is green, sometimes it is red and most of the time it is yellow. Two stocks that have nothing much in common are green for the next few years (but not necessarily months). Gen. Electric and Morgan Stanley both have very articulate A-B-C corrections which are somewhat stylized in the charts below. By the way, these charts do not show the intra-day or week lows, for instance GE actually did get below $6).

ge july 2011 ms july 2011

Unfortunately I cannot get them on the exact same time-frames, unless I put them together in one single chart;

ge ms july 2011

Both these patterns would strongly suggest that these stocks are back on their way up in a new bull market. MS has already retraced 50%of the first wave up, whereas GE may have a little more to drop in what is presumable a wave 2. In both cases a retest of the lows cannot be excluded completely but the odds are better that you will win with these stocks than with, for instance a Pepsi;

pep

This one is bright red. Should it make a similar A-B-C as the others a target of about $40, where wave 4 of previous degree resides , would fit the picture. That is down some $30 from where we are now and there is only $10 to the upside until you hit the upper trend-line. There is nothing particularly wrong with the stock. It has a P/E of 17 and yields about 3% .