Month: April 2011

Copper (the metal)

Hamilton

copper kitco 5 copper kitco 1y

Copper has the reputation of being well correlated with what is happening in the economy and has been given a honorary PHD for that. I doubt that it is that smart, after all it fell from roughly $4000 to $1000 during the great recession, or 3/4, more than most other things. Also, China did not miss a beat and that is where supposedly so much of the demand is coming from. Anyway, looking at the 5 year chart (Kitco’s the best I could find), the metal is NOT in a bull market as, to date at least, the up move since the lows is too bullish to be a bull market and furthermore it does not have any of the required subdivisions. It is instead most certainly a B-wave, one that is complete already or one that is presently completing a triangle (4th wave, always). Cannot be certain at this point but once the triangle and the thrust from it are complete this metal should drop at least by half if not a lot more.

Here is the triangle in more detail:

$copper

C could already be over but as this is usually the most complex leg in the triangle may still need another leg. Then d and e to follow. The thrust should be good for about $50.

RDS.a Royal Dutch Shell

Hamilton

Last November we looked at Royal Dutch to see what could be inferred from that for oil and the energy sector as a whole. So many companies displayed B-waves so it was only logical to assume that Shell was doing something similar. At the time that made our (incorrect)assumption that oil would peak around $104/5 rather plausible. Here is that chart;

rds nov 2010 2

The chart calls for a peak at about $75 for Shell. In the meantime ( about 6 months ) that is precisely where we are.

rds.a march 2011

Here we are at $75/76 with a nice wedge (green) to finish it off. This completes C and with that presumable the entire correction from march 2009.

PD Precision Drilling

Hamilton

 

pd.un feb2

This is Precision Drilling’s chart as of Feb 1 2009.  We argued that it was a buy then at around $5 given the nice 5 waves down and the buy low/ sell high principle. Below is today’s chart; for some reason I never looked at it in between.

pd march 2011

This is, by the way, a semi-log chart, sometimes they capture the essence better. This is an a – triangle b – c correction shown schematically. Notice theat time-wise is is very much overdue. Presently it is at the 4th wave of previous degree (my original target) but will probable push higher towards a 50 to 62 % retracement level. That is around $18.

ABX

Hamilton

Abx mar 2011 abx apr 2011

On the left last months take on American Barrick. Of course it did not work out exactly that way. As is all too often the case lately,  the “market” manages to use every excuse to delay and frustrate as many people as possible. What looked like the end of wave 2 (or B) proved to be just the a leg of a more complex correction, delaying the inevitable by a whole month and adding only a fraction of a dollar. In the meantime RBC had announced it was a buy and gold kept making new highs. But the company itself gave the impetus for a ride down, a little bit like Mercedes Benz taking over Crysler. Rather than stick to its knitting the company has decided to branch out into copper miming in a big way.To accomplish this they are upping the bid on Equinox and are now at a level where even the Chinese are unwilling to play.

Overpaying for an asset is all fine and dandy, except when gold companies are normally valued at 10x cash-flow ( for whatever reason ) and copper companies at only 6x. Assuming the deal is accretive from day one and that the market will go for the middle of the range, that is 8x, the stock should find its way to $42 easily and then on to our original target of $36.