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WOW - Woolworths Group

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It's inevitable margins will be slashed. They are 25% higher than any other supermarket in the world and it's attracted competitors (Coles bought by WES, Aldi, Costco etc).

Until margins are rebased, possibly in the next few years, you don't really know where you're starting the turnaround.
 

It's almost as if capitalism has somehow caused profit margins to be mean reverting? Who would have thought

You're right, investors who don't account for Capitalism 101 probably don't know where turnarounds might start from.

Disclaimer: I own a little, purchased systematically for ASX portfolio a few days prior to the takeover announcement.
 
Ok, today I initiated a position in WOW . Market moved in accordance to what can be expected from the pattern-it declined to $26.70, just 5cents below my target of $26.75 as indicated in the previous post.

The decline from Leading Diagonal Top of $27,97 subdivided in a nice looking 5-3-5 correction, bottoming just shy of Fib 23,6% retracement, which is a most common when retracing Diagonals.

Though WOW dynamics was extremely well predictable in intraday movements today and I could have basically picked up the bottom of $26,70 as I monitored market today, my strategy doesn't allow me to catch falling knives. After the bottom I expected WOW to rally in five waves, and it did. Only then I placed an order in the previous fourth wave area of $26.90, and at the end of the session I got filled. I marked my entry point with a green arrow, just to show how I utilise setups using EW.
I placed a stop at $26.20, just below LD bottom, as if WOW falls to this level before it rises above $28, it means the pattern is busted and another entry point should be waited for.







Now I expect a strong open on Monday, which breaks Wave 2 descending Channel level of $27,16 and at the same time wave (i) top, indicating that the strong rally started.
WOW still could subdivide into another corrective pattern before it breaches the LD Top of $28, by rising towards $28 and falling back to $26.60, but I consider this low probability scenario as waves to this point unfolded nicely and looks complete for the Rally to start.

If this scenario plays out(a rise above $28 materializes), I update charts and most likely targets of what could be expected from this trade.
 
Garpal Gumnut said:
I agree nulla, I got out before the takeover rumour. At a significant loss. I held as it was a good divi stock, but all our local Woolies are crap, and Coles are way ahead. I rolled over in to TLS for divis.

gg
Click to expand...

The old sell low and buy high strategy.
 
WOW cleared Wave 1 Top today(~$28), confirming that uptrend has started. The first struggle should be a retest or even jump above the trendline from 2000 low, which market proved as important by touching it multiple times.

Next month this ascending Trendline will be just above $30 level. Depending on how WOW gets there, it could mark either the end of the entire Rally (if the rise develops in a corrective manner), or just the first leg of it, as wave (A), if it rises in five waves.

The most optimistic scenario can be determined by using the retracement guidelines of Diagonals, which tells that 76,4% is the most common Level, which in WOW is exactly the level of support of wave B(blue) at $35.92.
Another common retracement level is previous wave (4) support at $34,76.
But those levels if reached, will be important as a Top, only if wave subdivisions are complete there. So again, the wave structure will be the key to determine the end of the rally, witch could take months to develop.
Most likely it will end when All Ords reach wave (2) top somewhere in 5800-6000 area, as remarkably both the XAO and WOW rally started when Wave (1) in XAO bottomed few days ago, the difference is that WOW will correct a 14 months decline, and XAO just 4. This big gap(almost 10months) tells me that WOW rally could be really spectacular as it tries to rebound the most price in the least amount of time.


Short term I will focus on how WOW reaches $30 area, but I expect the rise in a "gap and go" manner to continue from here, as those Diagonals (that I described in my few previous posts), tend to throw prices high and fast.



 
Most recent new low in WOW shows that rebound was minimal, indicating weak market. As All Ords are in a third wave, many stocks should mimick it by catching up, so the most likely labeling is as per chart below. Third wave in WOW should slice down through `$20 support and head towards 2002-2003 levels of $10, most likely in the next year or so.
Even in downtrend, shorter waves should offer some good trades, like the last one, and I expect one to produce a setup at $20 where 1 of (3) should find a bottom. So now just waiting game.


 

$10 lol, fat chance. Swish your tea leaves again, I think you miss read them.
 
I made this statement with analysis months ago
I still think it's valid
So a statement
 
Value Collector said:
$10 lol, fat chance. Swish your tea leaves again, I think you miss read them.
Click to expand...


That was for fun. I like to do some sentiment testing on this forum by presenting out of the blue price targets. From the reaction like this I see that despite WOW already has declined ~40% from the top, optimism remains entrenched.
This testing methodology also works good in realestate market-try to contact the agent and present 30-40% lower price from the advertised. From the response(if you get one), you can have a good indication in what life are agents living at the moment-are they complacent, a bit scary, or realistic. One interesting answer I just got recently, it looked like this:
" Best time to by property was 20 years ago, second best time to by property is NOW"
That was the good answer, indicating a bubble that has toped already.

In regards to WOW, the stock is in downtrend, longer term structure is unclear, stock market has toped and is in the early stages of decline, consumers are leading the charge and WOW is nowhere even close to the bottom.
$10 is too low and unrealistic only at the state of mind that operates at this stage. Later it could prove to be even too high when sentiment becomes dark and gloomy. I think 2015 is the last year when you see the dividend growth.
 
rimtas said:
That was for fun. I like to do some sentiment testing on this forum by presenting out of the blue price targets. From the reaction like this I see that despite WOW already has declined ~40% from the top, optimism remains entrenched.
Click to expand...

I just knocked the head off a few schooners. Price has increased exponentially since I started drinking, and yet my drinking chums maintain their optimism that prices will continue to rise.

Should I go long beer, or is the plural of anecdote not data?
 
You know
WOW could make $10
Was $5 not all that long ago.

While I agree that Elliot has a number of
Alternate counts and the goal posts move
From time to time.

I've seen some really horrible fundamental
Calls over the years as well.

Give the guy a break.
Your all like a pack of fundamental wolves.
 
tech/a said:
I've seen some really horrible fundamental
Calls over the years as well.
Click to expand...

Me too. Right in this thread.

rimtas said:
One interesting answer I just got recently, it looked like this:
" Best time to by property was 20 years ago, second best time to by property is NOW"
That was the good answer, indicating a bubble that has toped already.
Click to expand...

It's all so easy
 
tech/a said:
I'll let you know in 20 yrs time how bad the call is.
Click to expand...

The call is bad now. You don't need to know the direction of the market to know that.

Anyway, I have zero interest in one these debates so that's me done.
 
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