In the first two chapters of “Why is Soros selling this?” we investigated two of his major recent sells from an Elliott Wave point of view, in order to see if there are any touching points between Mr. Soros’ expectations and our own. We decided to conduct this experiment in attempt to form an independent opinion, without using slogans like “Go with the big fishes” or prejudices such as “Soros will cause the market to crash, because he is selling”. As it turned out in the previous two chapters, both Citigroup Inc. and J.P. Morgan Chase & Co. seem to be on the verge of crashing, so George Soros is doing what anyone in his place would do – get out of the way.
Recommended reading: Why is Soros selling this? Chapter One
In this final chapter we will take a look at the third stock, which Soros dumped lately – Bank of America Corporation. As you will see, the wave structure of the price action once again provides you with enough evidence, even if you have never heard of George Soros and who he is. We will start our analysis with the weekly chart, given below.
Bank of America’s stock prices bottomed in December 2011 and have been in a strong uptrend until March 2014. During that period prices rose from under 5$ up to 18$ per share. An achievement quite impressive, but experienced traders and investors never buy anything simply because prices are going up. In order to differentiate from the crowd we have labeled the chart and let it guide us. And the chart labeling suggests a double zig-zag W-X-Y, which is a corrective pattern, so the larger trend should be pointing down. The rule states that you should not trade against the trend. It looks like Soros respects that rule, contrary to the common belief that large investors and institutions can manipulate trends whenever they like.
Recommended reading: Why is Soros selling this? Chapter Two
If we want a more detailed view, we have to look at the smaller time-frames. On the 1-hour chart you will see the price swings in the white rectangle.
Five waves to the downside mean that the trend has already turned to the south. It could also mean that Soros is exiting this investment right before the downtrend accelerates. He is not bigger than the Market and he does not pretend to be. Instead, he is making his decisions according to the market’s direction. The main difference between him and the majority of traders is that he does not let things to get emotional. At the moment when everyone else is panically selling, he has long forgotten about the trade.
“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.”
– George Soros –
Images by dyn.politico.com
Sources: www.intellihub.com ; www.marketfolly.com
