A month or so ago this stock looked ripe for a good drop. Instead it is up marginally by a single dollar. Over all of last year it has managed to add only a dollar or two compared to the $16 or so immediately following the lows of March 2009. That was 100% up in less than a year and lately it took more than a year to add 5/10%. In fact, over the last full 3 years the stock added a mere $3 to $33, less than an absolute 10%. Clearly momentum is waning. This stock may be more representative of the US markets, at least as expressed by the Dow Jones or S&P. As it stands they too are just 8% away from the all time highs.

The rise from the March lows is clearly still an a-b-c counter-trend move. Even if this stock manages to double top the next big move should still be down to $26 in the best case, much lower in the worst case. Quantitative easing, twisting, bond buying  and most importantly talking up, should have little or no impact anymore on the amount of margarine you put on your toast.

Below is another picture of this stock and where it sits relative to the longer trend-lines;

Unilever is a little like the United Nations, it has operations in just as many countries and it’s businesses vary from margarine to detergents, cosmetics and toothpastes. Its employees are truly multi-national coming from all corners of the world. Unlike the UN, it is not run by a bunch of political hacks that can hardly be distinguished from common crooks. It is therefore a truly global institution in a , for the most part, non-cyclical business. If there are still blue-chips this one certainly fits the bill. It is also one of the few, Shell being the other, world concerns that have endured despite a dual cultural and linguistic history. Here are the charts;

(see also a previous blog!, that fairly accurately predicted events to date)  This stock has a p/e in the high 15 and earns about 1.3%. The lines drawn are not channel lines, they simple serve the purpose of illustrating between what points most of the trading on this stock occurs. Forget about EW and intuitively I should think that it is rather evident that you might want to buy this stock near the lower line which it has touched at least 9x, only once , very briefly, going through it by a miniscule margin. When the stock gets above the upper line, a relatively rare occurrence , only 3 x so far, it never stays there very long and then invariable drops right back al the way to the bottom line.  The stock is presently well above the line and no sane person should hold the stock! Unless, of course, the perception is that there is no where else to go.

From an EW point of view there is every reason to assume that in the next downdraft the bottom line will NOT hold. There is a “flat” forming with waves A and B complete , or nearly so. C may well have started already and targets +/- $17. The only question now is , is the wedge complete? See below;

Wedges are very accurate patterns but the also have a tendency to fool you by going one level further, but probable the peak is in. In any case the RSI and MACD are warning that a turn is due.

As the previous blog was not coded it cannot be found, so I have repeated those charts below;

Much of what goes into soap also goes into margarine, that is how the English (soap) and Dutch (margarine) decided to work together back in 1930 More recently the company was also working together with Proctor and Gamble which earned it a Euro 300+ million fine for running a cartel. It has also come into the spotlight for doing away with it’s defined benefit plan, long held out as a model. This is a big company, with a P/E at about 17 and earning a dividend of about 3.5%. The revenues are around 50 bln. a year. Employment , as with so many large companies, has been dropping steadily;

I show this simple because so many of us still believe the myth that large companies create jobs, for the most part they actually do the opposite. In any case here is the chart for UN;

Very nice 5 waves up, and a well defined triangle in the wave 4 position (it has to be!) followed by a thrust up of the appropriate size, staying precisely within the channel boundaries. It then drops almost 62% and the question now is if that was all there is or is there more to complete the correction and make it a bit more complex?

From the lows of March 09, the move is simple too bullish to be a new bull! and there is no way to count it as one. Also the initial A-B-C or 5 wave down should be followed by at least one other such leg so our educated guess is that the stock is doing a fairly large flat (which fits better with an initial A-B-C down!). We are now in the B wave up which itself is an a-b-c. This leg needs to make a higher high, that is above $33 to complete which could happen in the next few days. It may continue to about $36 where the c leg relates to the a leg by a very common 0.618. This could all be wrong , in which case the stock would probable go to the upper trend-line which is ONLY $4 higher at about $40

This analysis jives very well with that for Colgate Palmolive (CL) , see elsewhere in this blog. On balance this is a sell in the next few weeks at somewhere between $33 and $36, you risk a few dollars on the upside but avoid the potential of losing $20+ on the downside.