On September 1, 2016, Craft Brew Alliance was trading at $19.41, we said the following:
“…we have the following downside targets:
Although there is no assurance that the stock needs to decline to the referenced downside targets, any parabolic move must be watch closely as entropy will kick in at some point. In this case, we believe that the ascending conservative target is a lock.”
Since September 1, 2016, BREW declined as much as –38% to the $12 level on April 18, 2017, on an intraday basis. On April 7, 2017, we said the following:
“We don’t necessarily believe it but here we are, with BREW at a price of $13.15 and well within the range of the conservative downside target set at $12.57”"…”
Since April 7, 2017, BREW has increased by as much as +46%. Anyone contemplating a purchase of BREW, barring a takeover by another company, should consider the exceptional increase in 8 months as a warning to protects your profits.
Below we have charted the price action for BREW and suggest that if the 2016 peak is not exceeded then the April 2017 lows will be retested and possibly violated by as much as –24% or falling to as low as $9.31.
The $10 and $15 levels have set the precedence for why we should expect that the stock might not initially exceed the prior peak and fall below the the initial reaction low after a parabolic peak. In the chart we have labeled the ABC’s of the pattern that has been demonstrated so far. Currently, we’re the potential C3 stage in the chart. Our guess is that the C3 level can extend to the high of 2016 but should not go any further if the pattern is to repeat.
To be clear, no pattern needs to repeat simply because we created it. The best justification of not buying BREW at these levels is the run-up from April 2017 to December 2017. That +46% run in 8 months is enough reason to be cautious on BREW.