Year: 2009

TXT Textron, April 10, where there is smoke ………

Hamilton

The chart below is on a log-scale which often gives a better “picture” when a stock has made large  moves in fairly short periods of time.

TXT april 10

Textron made a big 48% gain yesterday, supposedly on a take-over bid by Kuwaiti and other Middle–East interests at $21. The stock was $3.57 a few weeks ago. So we missed this one while paying more attention to Bombardier that served our purposes very well. Anyway at this point the real question is, is it too late to get on board? Lets start with the chart. i am not overly happy with the 5-wave count shown (there is a problem with wave 3), but even so a return to $21 (or at least $19) is well within normal expectations (top of triangle wave 4). Similarly the “gap in the middle” theory also points to that same level. (this is log-chart so optics are odd). Of course this company with Bell Helicopters is now very critical not only to US defense but also the Federal Reserve, which if true makes it only more plausible. Cessnas are great flying machines and at a mere $300.000 or so within range for many “middle-class” hobbyists , just stop by Buttonville or Markham airports and see for yourself.

Wait for a pull-back towards the gap, if it occurs  (low $12) and use stops!

By the way, sell T, Tellus as it is not working and you are not losing anything. Will revisit that one later.

DW Dundee Wealth Management, April 9

Hamilton

By chance I tripped over this chart. It has a very well defined pattern.

dw april 9

First and foremost, when you go from $22 to $4, or down give or take 82%, all this stuff about the great depression and stocks dropping 90+% becomes pretty meaningless as for all intents and purposes you are already there (assuming, of course that the company is viable). Secondly this pattern is quite common and very reliable, essentially it is an A-B-C with the C=A as vectors (the B itself is either an a-b-c or a triangle) Recent examples would be Ivanhoe and Reitmans; a better example that already has done its thing is CI (US) Cigna.

ci1

Ci2

As this occurred a while in the past the top chart is from the past and the bottom one shows what can happen. The low was in 2003 or thereabouts and it went straight to the moon and back again. I do not anticipate anything so robust but on average the stock should return to the top of the B wave, say $15 and should do so in about the same time as it took to go down, about a year, or half of that. Given where it is a good trade would be to $9 where you earn 50%

As always click on the chart to enlarge, you can then even move them around to get two side by side.

AA April 7

Hamilton

On March the 5th we recommended a buy on this under $5 . The next day ,March 6th , the stock traded at $4.97 and it has rallied quite nicely and even after today’s lousy earnings this will probable continue a little longer. Anyway, sticking to our 30% rule we should be out a long time ago. Fortunately we forgot that we owned it, so are selling belatedly today at $ 7.70. Here is the chart.

AA april8

TSE AORD April 7

Hamilton

One would intuitively expect diversification to work better over a greater distance, like from Canada to Australia. Not so in this example as language, common heritage, natural resource dependence and a few other factors conspire to make the two economies, at least their stock exchanges, operate in an almost identical fashion. Here are the charts of the TSE and the AORD.

TSE April 7

AORD April 7

Notice that the TSE, the top one, starts later and therefore misses a wave that the AORD does have; otherwise the two are more or less identical. Something is distorting these indexes to cause this difference, perhaps capital weights, total return , whatever is responsible. To avoid this we will use the EWC and EWA iShares instead. Here they are.

ewc april 7

ewa april 7

Both iShares are pretty well identical having lost about the same proportion and doing it in synch. Both also suggest a 5th wave is missing to take them to their logical targets! In the future we will avoid the TSE index and use the iShare instead.