Let's review my JC Penny EW model predictions, shall we? [JCP]

Back on October 8th of 2012 I made my first EW model of JC Penny, ticker JCP.  Back then, the shares were trading for $30.98 per.   I wrote, " I believe this has to put the shares into a 3^rd wave and it will be a 3^rd of a C wave so it should have some bad downward gaps in it (AKA "cliff diving").

Since then there has indeed been some cliff diving.  In fact, the shares currently trade at $7.35.  Yes, that's right, they plunged more than 76% since I panned the shares.  

But today I'm writing because I see a potential bottom in sight.   The fact that the shares closed below where they started proves that JCP shares were not just a bubble, but a mania (see long term chart at left).  In other words, JCP is not doing anything unique and if it shuts down completely then no real damage will occur to the economy.  

But since the government has taken responsibility for the economy, it does not want to see any big names go away.  Not only do they take with them many low paying slave jobs (the kind that enables government to bribe people with EBT cards and Obamacare), but also it makes people look again at government's track record of controlling the economy.  So government could easily work behind the scenes to prop up worthless JCP shares.  After all, without a debt ceiling why not spend?

Assuming that government bails out JCP in order to save face for itself, there are likely a lot of short sellers who are leveraged into these shares right now.  I am NOT saying "jump in for immediate bounce".  I am saying that I think they will reverse trend soon, probably within the purple circle.  

I base this prediction on nothing more than my EW modeling of the stock (you know, the same thing that caused me to pan it at ~$30).  The right hand chart is, I believe, the C wave of the pullback.   That C wave should be made up of 5 down, 3 up, 5 more down, 3 more up and then a final 5 waves down.   Wave 1 is the first five waves down, wave 2 is three waves up, 3 is five more down, 4 is three up and now the 5th of C is playing out.  A case can be made for saying that the 5th of 5th of C is actually in progress right now.  I would not catch a falling knife here as the shares could easily fall to $2 or $3 before catching the short squeeze bid.  But these shares are worth keeping a close eye on right now because the waves indicate that the bottom is likely close.  When this thing finally bounces, expect an easy triple off the bottom, whatever that turns out to be.  There will likely be short sellers with their asses on fire getting too greedy at the bottom and all cock-sure of themselves.  They will pay any price to cover their shorts once the herd finds a bottom on this and then doesn't go down anymore even on bad sounding news.  Again, a major indicator here will be if the company reports something that should be dire news but the shares refuse to tumble anymore.  This is when smart longs will start looking at picking up shares while being careful about not holding too long if the trade goes against them.