PEIX - trend reversal?
Prior to yesterday the past 4 days started with a LARGE sell off each morning and we watched 5 straight days of sliding. Every time a cup started to form, if you're like I was, you said to yourself "oh no, this is the bottom and I should buy." Only to buy then promptly watch the stock fall the next day, hour, minute. This seems to happen every time - why is this so frustrating? Can these dips be predicted?Predicting the bottoms
No stock in the history of ever always moved smoothly to the top and made a clear turn, then moved smoothly to the bottom. Many books have been written about the nature of up and down trends and how to tell if you're nearing the bottom. Today we're going to look at this stock in real time. As I write this, you can see where the stock is at this moment in the image above (just starting to stop it's sharp decent). Let's see if PEIX follows the rules and watch as this unfolds. We all know there has not been any major news on Pacific Ethanol since earnings, but the stock just seems to still be moving pretty wildly as people get in and out.
For those that got out recently, I think they'll be upset over the next few days as this rises to around the mid-fives.
How it works - Most stocks move in 5's. I've charted this last five above. There's all sorts of rules on how to determine what leg of the 5 legs we're on, but generally the 3rd leg is the longest, the 2 & 4 legs are correction legs and if 2 is long, 4 will be short and vice versa, and within each set of the 1,3,5 legs you're likely to see a smaller set of 5 legs adhering to the same rules.
For example, i bought at $4.27 on Wednesday because the 5th leg down of another 5 legs down of a long 3rd leg down was just finishing up. That saved me from buying a few days earlier in the 5's as it was clear we were still not at the 5th leg down and there was more to lose before people started jumping back in.
Now what we are seeing (or what I believe we are seeing) is the start of 5 waves up (shown as the green arrows in the above). Just as the rules go down, they go the same way up. We'll have 2 correction legs (the 2nd and 4th leg), the 3rd leg should be the longest and be at least 1.68 times longer than the first leg. As I type, it looks like the 2nd leg is just finishing up, however, the 2 & 4 often have a fall-rise-fall before starting the 3rd leg, so it wouldn't shock me to see it go below $4.46 before it starts the long 3rd leg up.
So where are we now?
I believe it's headed up. But not all the way up to the big numbers. Just to around the mid-6's. Then we'll likely finish off this large long 3rd wave down we've been in since May.
Hope that helps! Enjoy!
Nick
