United Parcel Service, Inc. (NYSE:UPS) Signals Exit
Denver, CO, 07/15/2013 (Avauncer.com) – United Parcel Service, Inc. (NYSE:UPS) (Closed: $86.12, Down: 5.83%) was hit hard in the market when it announced a much lowered earnings forecast for 2013, about 3%. The market did not take it kindly and the stock opened gap down and later finished the day close to the low of $85.49. The huge volume accompanying the fall underlined the degree of sell off.
From $37.99, the March 2009 low the price had rallied to 70.89 by May 2010, an advance of about 33 points. Again, from $60.74, the August 2011 low it rallied to $91.78 on this July, a rally of about 31 points. These two rallies of nearly equal magnitude were punctuated by a correction where another new high was created in $77 on February 2011. This kind of correction, where even the corrective move creates a higher high, is called an Irregular Flat in Elliott Wave theory. It implies further bullishness, which has brought a rally till $92.
Alternatively, the whole rally from the 2009 low could be called a corrective rally, forming a pattern called Diametric by Glen Neely, who is famous for his modified version of Elliott Wave theory, called Neowave. Diametric is a 7-legged pattern and the 7 legs of the rally is clearly visible in the monthly chart of this stock. The main thing is, by both the schools of Elliott Wave, a major top is in place.
This scenario is very well supported by the indicators. The latest high at $91.78 on last Thursday not only produced a much lower high in the indicators, but a negative value for the weekly MACD. The bearish implication of this large a negative divergence can’t be ignored.
It is recommended to exit this stock if it fails to sustain above $85 and $84.20 - $84.45 zone.