Obvious missed call on AMD

In this post entitled "watch AMD" (not buy AMD ;  ) I provided a model for AMD which suggested that a wave 1 up had occurred, that the expected a-b-c downward into wave 2 was very possibly if not likely complete and thus the next expected wave should be a 3rd wave up with target price of $7 before the end of year.

Shortly thereafter, the stock plummeted 13% in what is clearly a 3rd wave of some sort.  So how can the model be off this badly?  How is that reconciled by the Elliott wave principle?

To start with, here is the short term model I provided in the last post.  Notice it says 1/3? not 1/3!!!  That's because until something is confirmed, it's still an opinion/educated guess.  The annotations shown at left do follow EW rules but there are several important points where the herd can take a different path and that is what the ? annotations mean in my models.

What cannot be debated are the first 5 waves up culminating in red 5.   That is clearly a motive wave.  Then there is a clear a-b-c retracement.  The prior assumption was that the next wave would be 5 up because the red C wave looked to be a big 2nd wave.  With the recent stock collapse we know that was not the case.  In fact, those trading using EW would have put a stop loss @ $4.00.   When the chart breaks trigger points you have to look at the data, not stick with prior models which no longer fit EW norms.  Probabilities, not certainties.  And you have to realize that volatile stocks like AMD are more akin to antelopes that water buffalo in their likelihood to change on a dime.

So what did the chart morph into?  Well, there are two likely possibilities, presented in order of highest probability first.   In the first chart below, the new model suggests that the first wave down that hit the 50% fib was not 3 waves as it appears to be, but rather 5 waves.  Then there was an a-b-c retracement into what is shown as red b.  With the 13% plunge, the waves started to form the real C wave of the retracement which the market could be deciding should really be at the 61.8 fib instead of the 50% fib.  This would make sense because C waves are generally stronger than A waves.

In this case, the target price of the 3rd wave is reduced a bit from where it would be if the retracement had really bottomed at the 38.2 fib.  Make no mistake, this recent plunge hurt the shares technically and reduced confidence in them.  Those who find a lower buy price perhaps around $3 will not need to see $7 anymore before they sell since their percentage gains from $3 to $6 i more than that from $4.20 to $7.  It's all about percentage, not absolute price.  Not saying that $7 couldn't happen (it still could) only that the odds are reduced that they will go that high.  In addition, the time frame for a 3rd wave peak has very likely been pushed into Q1 of next year.

The next likely thing I see as possible is that the shares will bottom in a 2nd wave that turns out to be an ending diagonal made up of a-b-c-d-e waves each with the structure of 3-3-3-3-3.  In that case I would model a bottom somewhere in the blue circle in the chart below and that would be the real wave 2 down.
Again the fact that we had 5 waves up already should not be forgotten.  That is clearly a wave 1 up.  Now we are just trying to see how the 2nd wave will be formed.  The highest likelihood is always the traditional a-b-c vee style retracement for a 2nd wave.  But an ending diagonal is also possible which leads to an inclining double bottom as shown. Time will tell but I think there is still a good payday for anyone catching the next bottom of AMD shares even if the company itself can never seem to get out of its own way.