MCD, McDonalds

February 8, 2011 Hamilton

McDonalds has a very interesting chart. Most stocks dropped from 2000 to 2003 and so did the hamburger chain. Than in 2008/9 most stocks dropped again,often by even more but MCD barely budged. Instead of dropping it formed a rather clear and distinct triangle, a consolidation pattern that almost guarantees further gains. These gains “normally”, but nothing is normal in these markets, equate to a level equal to the size of the mouth of the triangle, which is why we thought the stock was overdone at $70.

As it happens the stock kept marching on and recently peaked at about $80, this is roughly 1.6X the triangle measure and about as far as they ever go. Once this , minor counter-trend rally is over (perhaps at $76 or so) this stock should be exited or sold.

NFLX, Netlik Inc.

February 5, 2011 Hamilton

Got this one wrong the first time (it was not a sell @ $156!) so here is another look.

The data on the right is from Bigcharts, if it is correct this is scary. Who says we are in a bear market? At $220 it has exceeded the meteoric rise of our own darling stock Nortel which never got higher than $124.55 Yield , there is none. P/E a very modest 74.27, even Japan did not get above 65. Short interest, I have never seen this before, a mere 21.48%.

The count on this thing might be 1-2 1-2-3-4-5 4-5 and just about complete once the upper trend-line is hit. This is obviously a short but I would not touch it other than with put options. This is a momentum trade if ever there was one, it will end in grief once the last “greater fool” leaves the stage. Ironically this is happening just as that other movie rental company is up against the wall.

HSE Husky Energy.

February 5, 2011February 5, 2011 Hamilton

See our previous blog on August 26. In today’s Toronto Star, Bill Carrigan an independent stock-market analyst, mentioned the stock as a buy in an article that was primarily about the use of stop-loss orders. I did not find the article very “actionable” as it left me with the feeling so now what. So here is my take on the matter.

Here is the big chart , and the intermediate chart picture. I have inserted a count in both, but am not entirely convinced that either is perfectly correct, but we are not trying to be perfect, just very , very , plausible. Since last August things have worked out well, if slowly, but you are picking up a 4+% dividend along the way. In the mean time we have managed to break out of the “wedge” formation that we were in for a couple of years. Here is a little more detail;

The break-out is clear enough, it is not too late to buy as it could have quite a way to go, so buy at the market but put in a stop-loss at about $26.50 (with a limit of $25). You do not want to see the stock re-enter the wedge represented by the downward sloping line over the tops of the wedge. You will be risking about $2 initially. If and when the stock moves up, you ratchet up the stop-loss but just like driving a car, don’t go bumper to bumper. Simple adjust to the purchase price and wait for things to go your way, the trend, after all is your friend and most of us are our own worst enemies!

So where do you sell, at $36 or a little lower. Doing that would net you about 33% plus one year carry at 4+% for a total of 37%. Along the way, of course , there is no harm in reformulating your strategy but remember that if you always make 40% you should do just fine. If you get “married” to a stock you will inevitable lose money.

Just to see how plausible this trade is , a look at West Texas oil is worthwhile.

We do not like oil (for the moment, and perhaps longer than that, see elsewhere in this blog) so why like Husky. well, quite clearly HSE has been completely impervious to the price of oil, for the past two years oil was up and HSE down. This stock listens to a different drummer so this is not a great concern, for now. The discrepancy may have something to do with the ownership structure of the stock, which is fairly unique. By the way, there are a number of counts on this stock that are much more bullish than these.

You can click on these charts to enlarge them and move them around.

TSE

February 4, 2011February 4, 2011 Hamilton

A few days ago I put out this chart and argued that this index could implode any time now. The B wave seems near completion (at last) but if that does not turn the tide we will soon double top (15070, or so) and failing that either the parallel trend-line or the line through the tops at about 16000. Still a long way possible but not in the grand scheme of things. So why are we over-valued at these levels? Essentially because the Fed. orchestrated every single top artificially. If it was not for Long Term Capital. Enron, Y2K or 9/11 and the associated flooding of the monetary system, these peaks would not occur They are not normal.

Here are just a few examples of what drives the index into these peaks.

Nortel at the peak constituted 30% of the TSE. It was a child of that “widows and orphans” blue chip stock Bell. Most brokers did not recalibrate stock allocations.(the actual high was only $124.55, not $800. But the chart is adjusted backwards for stock splits.

Lots of people got rich on JDS , most gave it back. Optic fiber and that sort of stuff that was not well understood. Global Crossing was in the same field.

GLW, Corning. Most only knew this one for the pots that they made for in the oven. They too went into the fiber optics business where over capacity killed the goose very early in the game.

WIN, with a ticker symbol like this how can you lose? This is Wiland.

There are easily a few dozen more but the point is that you only need a handful of such stocks and you peak well above where you normally would. You get a little stock tsunami where each and everyone contributes to amplifying the index. Today there are not quite as many high-flyers like Nortel, but there are very many stocks that may be a long way ahead of themselves.

Share this:

Share this:

Share this:

Share this: