General Mills Bearish Elliott Wave Cycle Spells Trouble
EWM Interactive | Oct 29, 2020 06:18AM ET
The last time we wrote about General Mills (NYSE:GIS) stock was over a year and a half ago. Following a bullish reversal Elliott Wave analysis helped us correctly predict in late-December 2018, the stock was trading above $51 a share in late-March 2019.
It was a 33% recovery, whose structure, however, didn’t look quite as anticipated. It was supposed to be a three-wave correction, following a textbook impulsive decline from $72.95. Instead, it was an almost straight line to the north from $36.42. So, on March 26th, 2019, we published the chart below in an attempt to prepare for what lies ahead.
The speed and sharpness with which General Mills moved to the upside only meant a bigger three-wave pattern was developing in wave B. The 1-2-3-4-5 structure of wave A was very clear, so we could keep relying on this count as long as its starting point remained intact.
h2 Fibonacci Resistance Discouraging General Mills Bulls/h2Whenever a deep retracement is unfolding it pays to keep an eye on the 61.8% Fibonacci level. Corrections often end shortly after reaching it. On the daily chart of General Mills stock it stood at roughly $60 a share. On the other hand, a notable three-wave drop in wave ‘b’ of B was supposed to occur before the bulls could reach that target. The updated chart below shows how things turned out.
Wave ‘a’ of B climbed to $56.40 in September 2019, when wave ‘b’ started. It reached bottom during the March 2020 carnage, but the bulls took over again to lift the stock to $66.14 this August. The 61.8% level has been breached, but $72.95 is untouched, which means the 5-3 wave cycle is still valid.
Now, we have a complete impulsive decline in wave A, followed by a clear a-b-c zigzag in wave B. If this count is correct, another selloff in wave C can be expected. The bears should drag General Mills below the bottom of wave A. Currently near $60, a drop to sub-$36 means the stock can lose ~40% of its value in the months ahead.
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