While browsing blue chip stocks I've came across SUN as having one of the clearest wave structures on the market, almost textbook. This enables me to throw a forecast what could happen next on the highest probability basis using Wave Principle as guide.
I must note that I do not hold this stock at the moment, sold it just before last dividend ex date(I never take dividends). It was quite an easy to make profit on this stock so I am keeping a close eye maybe the future will throw a nice entry setup somewhere next year.
In the first chart you can see how SUN made nicely three waves up, even subdivisions are clear. This foretells that a rise is over and a stock is poised to go down to test 2009 low in the years to come. This bearish scenario will gain a lot of weight if stock closes below $9.8 thus overlapping with a (A) wave high. First indication of this drop could be the Impulse channel break and retest it from below, that's where long term investors should throw their investments or stop averaging down as much lower prices will be on the table later. The wave structure is the key-we need 5 waves down to confirm the trend up is over.
Other scenario is still bullish longer term and SUN made only 3 waves out of 5. So I am looking here for some sort of correction which could extend in time towards the lower Impulse Channel but not brake it. It could be a Triangle, Flat or Expandet Flat, total of 11 variations available what form it could take so it is almost impossible to predict when it ends until it is not over. But if SUN keeps on going with the textbook pattern further, IT should end on the lower channel, about one year from now in a $12-13 zone. And then thrust higher to new highs in the final leg of advance .
So basically trading strategy is simple here-hold , collect dividends and add if channel holds. Or hold, collect dividends and sell if channel breaks and 9.8 level is breached. Basically all stops should be placed at this level because it is the last frontier for bull trend to hold. Wave (4)
can drop to this level, but not below.
So shorter term (next few quarters) both variants are bearish. There is a small probability for wave 5(of(3)) could be extended where the stock
could accelerate towards 2007 high without a one year correction, but it is not a textbook pattern so I stick to one of those variants discussed above.
Cheers