Post by TradingForGod on Aug 26, 2004 7:03:26 GMT -5
One of CT’s favorite stock (for good reason) is K-mart. This widely known issue has survived the hard times of Wal-Mart competition, store closures, and the “Martha Stewart Collection” to stage a huge come-back in 2004. So far this year it has almost quadrupled in value. WOW! I sure wish I knew how to pick stocks!
Let’s use the things that we have been discussing recently to analyze the chart below. You can see that the rally off the low has had two main up legs so far, one into early April and one into early July. The first leg up (wave 1) was $26. The second leg up (wave 3) was about $44, right at 1.618 Fibonacci extension target. Each up leg has been followed by a sideways consolidation (waves 2 and 4) that lasted about six weeks. Note how these corrective sell offs evolved as an a-b-c pattern (in Elliott Wave lingo). Both of them gave great buying opportunities into the lower Bollinger band. In fact the sell off that just ended gave TWO such opportunities.
KMRT is currently trading sideways in a narrow range after the explosive pop higher two week ago. The current price is above the 20 and 40-day MAs, but the 20-day MA is below the 40-day MA right now. That’s pretty neutral. Momentum, as expressed by the MACD is positive, but not real strong right now. That’s also pretty neutral. The ADX trend indicator has weakened dramatically over the last two months as KMRT has chopped sideways, and stochastics are pointed lower right now. Again, taken in total this is pretty neutral too.
Putting it all together, the math-based indicators suggest that KMRT could go either way from here, at least in the short term. HOWEVER, because of the Elliott Wave analysis I am strongly leaning toward an upside resolution of this choppy price action. If that happens, there are two primary targets for the rally. Normally the 5th wave of a move is about equal in length to the 1st wave, especially when the 3rd wave extends like this one did. If that happens here, then KMRT should peak out just inside of $88. If you are long this stock, I would suggest taking at least half of your position off the table in this area. If the 5th wave extends as well, which is unusual but not unheard of, the target for the rally is at about 105ish. I would exit all length at that point, save perhaps 5-10% just in case this market goes psycho.
After this 5 wave rally ends, KMRT should correct anywhere from 38% to 62% of the whole rally. Frequently, corrections pull back to the bottom of the 4th wave of the previous rally, which in this case would be this months low at about $62. A close below there probably means the primary bull market for this stock is over. This is especially true if it happens after the uptrend line, now at about $57, gets up over $62 as well. A violation of the trendline would be doubly negative.
It’s been a great ride for KMRT this year, especially given the malaise in the overall equity market. But it seems to me that we are nearing the destination and we need to prepare for arrival. Put your tray tables up, and your seatbacks in their full, upright position.
Blessings,
TFG
Let’s use the things that we have been discussing recently to analyze the chart below. You can see that the rally off the low has had two main up legs so far, one into early April and one into early July. The first leg up (wave 1) was $26. The second leg up (wave 3) was about $44, right at 1.618 Fibonacci extension target. Each up leg has been followed by a sideways consolidation (waves 2 and 4) that lasted about six weeks. Note how these corrective sell offs evolved as an a-b-c pattern (in Elliott Wave lingo). Both of them gave great buying opportunities into the lower Bollinger band. In fact the sell off that just ended gave TWO such opportunities.
KMRT is currently trading sideways in a narrow range after the explosive pop higher two week ago. The current price is above the 20 and 40-day MAs, but the 20-day MA is below the 40-day MA right now. That’s pretty neutral. Momentum, as expressed by the MACD is positive, but not real strong right now. That’s also pretty neutral. The ADX trend indicator has weakened dramatically over the last two months as KMRT has chopped sideways, and stochastics are pointed lower right now. Again, taken in total this is pretty neutral too.
Putting it all together, the math-based indicators suggest that KMRT could go either way from here, at least in the short term. HOWEVER, because of the Elliott Wave analysis I am strongly leaning toward an upside resolution of this choppy price action. If that happens, there are two primary targets for the rally. Normally the 5th wave of a move is about equal in length to the 1st wave, especially when the 3rd wave extends like this one did. If that happens here, then KMRT should peak out just inside of $88. If you are long this stock, I would suggest taking at least half of your position off the table in this area. If the 5th wave extends as well, which is unusual but not unheard of, the target for the rally is at about 105ish. I would exit all length at that point, save perhaps 5-10% just in case this market goes psycho.
After this 5 wave rally ends, KMRT should correct anywhere from 38% to 62% of the whole rally. Frequently, corrections pull back to the bottom of the 4th wave of the previous rally, which in this case would be this months low at about $62. A close below there probably means the primary bull market for this stock is over. This is especially true if it happens after the uptrend line, now at about $57, gets up over $62 as well. A violation of the trendline would be doubly negative.
It’s been a great ride for KMRT this year, especially given the malaise in the overall equity market. But it seems to me that we are nearing the destination and we need to prepare for arrival. Put your tray tables up, and your seatbacks in their full, upright position.
Blessings,
TFG
