Toyota Motors (TM) is now ready to collapse.

Toyota Motors seems like it is doing fine.  It had the stuck gas pedal scare a few years ago but hey, they just settled all charges for a measly $1.2 billion.  I guess without that problem hanging over their heads they should be poised to take off.  The only problem with this idea is its chart.  After a clear 5 waves up into the 2007 peak, we got 5 waves back down (have to expand the chart to see them because they are so tight, see next picture below for that).  I count the 2009 lows as wave 1 down.  Since then and with the global benefit of the Bernanke Put, TM bounced like everything else.  After all, why not?  It's all one market when credit is the reason for sky high equity and other financial asset prices.

Unfortunately, that bounce, which has since peaked, was clearly corrective in nature sporting an a-b-c shape instead of 1-2-3-4-5.  That formed wave 2 of the new bear market (although most people don't get it).  Wave 2 could not make a higher high than wave 1 and so we are left with a declining double top.  This is clearly a bearish formation.

Here is the wave count of red 1 down:

Fast forward to today.  If wave 2 up is finished then we should have 5 waves down into wave 1 of 3, and then an a-b-c pullback into 2 of 3,  I think that has now peaked and what comes next should be a 3rd of a 3rd which means that cliff diving is likely in TMs future.

Oh, 1 more thing.  I forgot to show the fib retracement in the model above and so here it is by itself without other distractions.  Well, wouldn't you know it.  A perfect retracement to the 3.82 fib as if the chart knew that level was sitting there.  This is the minimum retracement that one can expect.  It is bearish because the stock is beginning to roll over as soon as it can after meeting the bounce expectations.

For those who like to play options, this is the time to buy puts on TM.  Why?  Because 3rd waves move quickly.  They don't fool around sideways pissing away your time value.  Just because a stock has entered a bear market does not mean you will do well with puts, especially if your time horizon is too short.  But TM didn't just enter a bear.  It's clearly been in a bear since 2007 with a massive sucker's bounce.

Here are the three deepest out of the money plays currently available for TM for the Jan 2016 expiration.  If you can goad some idiot seller into giving you some of those 55s for 35 cents I think you will do very very well on them.  10x at least on that price, probably much higher.  Why???  Because look at the slope of that first wave down from 2007-2009.  That was wave 1 folks.  TM is already into wave 3 and is about to go through a 3rd of a 3rd of a 3rd of a 3rd.  Think assured gap down, and a large one at that.  TM could be $70 by the end of this year.  I don't think I have to tell you what that will do to the price of the 55s.  Like I said, volatility is completely under-priced right now and Lloyd Blankfein just told us it won't stay like that forever. Nod nod, wink wink.