General Mills stock plunged by 50% in the second half of 2018, following a decline from its July peak of $72.95. So, when the stock touched $36.42 in late-December most investors were not exactly optimistic about it, to put it mildly.
First, the decline from roughly $73 to under $36.50 had a the structure of a perfect five-wave impulse, labeled 1-2-3-4-5. According to the theory, a three-wave correction in the opposite direction was supposed to follow. In addition, there was a strong bullish MACD divergence between waves 3 and 5 – another reason not to trust the bears too much.
General Mills Stock – a Top Performer in Q1 2019
So instead of extrapolating General Mills stock’s decline into the future, we thought the stage was “set for a ~30% rally.” The resistance near $50 a share looked like a viable first target in wave B.
Yesterday, General Mills stock closed at $51.09, up 33% since we examined its chart. The problem is that this recovery was much sharper than we expected, which means wave B is not over yet. The manner in which the bulls conquered $50 opens the door to $60 a share, which also coincides with the 61.8% Fibonacci retracement level.
Wave B is still supposed to develop as a three-wave pattern. Once the current rally in wave “a” is over, a pullback in wave “b” of B should be expected before wave “c” can complete the sequence. In other words, General Mills stock can still add another ~20% before wave C down begins.
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