CI, Cigna again, to log or not to log.

ci feb 17 2016ci feb 17 2016 log

Recently I was asked when you should use a semi-log scale chart or an arithmetic one. There is no simple answer but EW is very much about good looks, that is beauty is in the eye of the beholder. Here we have Cigna, a healthcare/ insurance company that we looked at many years ago. We identified, correctly, the correction in 2001/2 and called for the stock to rise substantially to $37 from $15. The $175 level was not on the radar.

Revisiting this stock today, it is hard to make sense of the meteoric rise over the past 6 years, about 30x. Is this Obama care? Low interest rates? Or just a fluke? This is when a semi-log scale is appropriate (on the right) as it compresses the chart and gives you a better sense of proportionality. All of a sudden we get a nice channel and a plausible wave count.  The stock clearly has peaked or is peaking.

The other side of the channel is at about $55, and the 4th wave of previous degree at $6 to $15 depending how you count. Either way this must be a sell.