Month: January 2011

RUS, Russel Metals

Hamilton

rus 1 rus 2

Another B-wave?, they seem to be a dime a dozen. Perhaps the market is telling us something. Just like most everything seemed to be a buy back in the spring of ‘09 , now almost everything seems to be a sell. Russel Metals is not quite as obvious as many of the others, but it does happen to be in a category that has undoubtedly been a big beneficiary of the China story.  This B-wave is a little bit of a stretch, the megaphone in the middle is less than compelling, but it could just be a simple flat which fits almost as well. The C=A is close enough and both the RSI and MACD have been on a downward slope for almost a year. Furthermore we are pretty well at the 61.8% retracement level.

PGF Pengrowth

Hamilton

PGF

One of the best energy companies and one that has traded for the longest time as an income trust. Just to complete this B-wave series note that this one meets most of the requirements. First C=A and C and A are almost equal to B as well. Secondly we are at a 50% retracement. Thirdly the RSI and MACD are dropping. The only fly in the ointment is that we have not (yet?) reached the upper trend-line. but we did reach the level of the 4th wave of previous degree.

SAP, Saputo

Hamilton

sap big 2 sap big1

Sometimes EW is very ambiguous and at other times it presents itself as on a silver platter. The chart on the left has 5 waves up, as clear as a bell, but if you extend the time frame (as far as I can with Bigcharts), things are less definitive. Waves 2 and 4 (in purple in the left chart) are both zig-zags which is not impossible but is very unlikely to be correct. A little tinkering gives us the count on the right, here both waves 4 are zig-zags but they are of different degrees so the guideline is not violated. So much for EW niceties, either way this thing seems to be topping and is most certainly trading well above its average over many years (roughly purple line on the right). A drop back to $25 or $ 20 is entirely realistic. Again when wondering “how high is high”, the answer is simple; this is high.

A more detailed look ore or less confirms that opinion. Here is the short-term chart;

sap 3

At first blush this looks a lot like a B-wave, except that it has gone beyond what one would normally expect. B-wave (green) or 5th wave (black) matters very little,at least for the next big move. Notice that both C and A in the B-wave are equal plus a little. in a 5th wave this would make the 5th equal to 1 and 3 combined, also very common. Both RSI and MACD are dropping. Time to apply “by low , sell high”.

LIF.UN , Lab. Iron Ore. When things are to good to be true, they often are.

Hamilton

lif.un 2011 lif.un 2011 2

Back in October of last year I thought this was a sell at about $55. At that time you had a three-wave move up and you had reached the level of the B wave in the previous down-leg, a very common occurrence. I was dead wrong ; the stock just kept on going like the energizer bunny. Now that things have gone this far it is clear that an “irregular” B-wave has formed ; irregular meaning not normal. What is not normal is that the B-wave did not stop at the previous top but kept on going , almost as if things are too good to be true. Well they are, and that is why we would sell, now.

The move into the high of early 2008 is a near perfect 5-wave move ( this is clearer using semi-log scale!). The fourth wave in this structure is a triangle. As is to be expected, the thing peaks precisely perpendicularly above the apex and then drops, again as is to be expected, back to a level that equates to the lowest point of the triangle. The drop is an a-b-c which could be an entire correction or just the A wave of such a correction. Given that it took less than a single year to erase an 8/9 years advance, the suspicion should be that the correction is only partially done. Ergo, this could be a B-wave. Given the circumstances under which this low occurred – a smaller investment-dealer/mutual fund operation was long this stuff but due to margin calls from their house bank was forced to sell indiscriminately – explains the initial rebound. The China story probable took care of the rest.   Here we are at $75, through the upper parallel trend-line and at the highest possible trend-line. A very nice a-b-c has developed and both the RIS and MACD are , once again, pointing downward.

(Irregular) B-waves are usually driven not by fundamentals but by a story,  a theme , or simple momentum trading. Loewen, the funeral home operator had a beautiful B-wave that took the stock right back to its highs before diving into the ground under the weight of the Mississipi legal system. You can just feel that that these prices are too good to be true. Step aside.