Month: May 2011

R, Romarco update

Hamilton

R may 2011

See earlier comments on this stock. The stock has behaved precisely as expected as pictured again in this schematic and stylized chart. It is just shy of the ideal low of $1.50 but so often in this market stocks turn before they get there. The pattern above, for those that are interested, is most probable an a-b-c X a-b-c wave 2 retracing about 50% of the entire rise from zero, and falling right back to the wave 4 level of previous degree. The pattern is symmetric in every detail (use the mirror, green line and invert the image) which adds confidence and credibility to the view that this one is ready to resume its upward trend. For the sake of 10cts it is not worth waiting. The first target would be $2.21 to close the gap and then  $2.60.  This latter target would be reasonable even in a continuing bear market. By the way, a nice Fibo ratio would develop if it did this. Suppose you buy at $1.62 and make $1 when selling at $2.62 you would have a gain of 62%, all are Fibo numbers.

AFL , Aflac

Hamilton

afl may 2011

Aflac is an insurance company. Claims are increasing exponentially as a result of the non-existing global warming and, at the same time, a major source of income, that is the yield on collected premiums has also become virtually non-existent courtesy the Feds interest rate policies. Yet this stock has climbed right back up to near the all time highs. I suspect, as is so often the case, that the stock has met resistance by way of the channel that used to provide support. A prudent person would sell this stock without regard to the charming and irresistible  duck or goose that represents this company.

CML , CML HealthCare Inc.

Hamilton

This stock trades on Toronto but has operations in both Canada and the US. It recently converted back to a normal corporation from an income trust and has adjusted its dividend payout to a level that equates the previous distributions (that is for Canadian residents holding the stock outside a sheltered investment vehicle such as an RRSP.  It pays $0.75 per annum which at today’s stock price of about $9 gives a return of 8.33% (or after normal dividend gross-up around 11.75%). It is in the business of community based healthcare services. Doctors typically refer patients to these healthcare providers to have things like routine blood/urine and whatever other tests done. The results are simple e-mailed back to the doctors who do the actual diagnostics. Illnesses such as diabetics, high cholesterol , certain cancers, being overweight etc.etc. that are mostly diagnosed on the basis of these test promise an ever expanding clientele and at least in Canada it is mostly Government paid.

Here is the chart;

cml may 2011

This is the best chart I could get. It is from the company’s own website. The move from $10 to $17 is very obviously a B-wave, implying that the drop back down must be a C. In this case it looks and feels like a “contracting diagonal triangle”, or in English, a wedge. (think Ford). Typically these wedges retrace themselves entirely , that is once the low is in back to about $17.5.  The low should be at about $8.25 , but most times they do not get to the extreme; occasionally they exceed it. So where can you get a double and earn 8+% ?

KGI , Kirkland Lake Gold. Kinross warrants.

Hamilton

 kgi l kgi s

Being rather agnostic about the entire gold sector I try to be as objective as possible. Here is a stock that may well go up over the next few months. RSI and MACD are both positive and the stock appears to have traced out a nice triangle which could  be in the 4th wave position. If correct the stock should rise to about $17/$18.On a log-scale the A and C legs would be about equal, each having tripled more or less. Triangles can also be in B-wave positions and therefore a stop-loss should be used (at about $13)

 

 

kwtc compared kwtd compared

One of my faithful readers mentioned that there is also a warrant d on Kinross which might be a better buy than the c warrant as it has a longer term to expiry. I would agree that the longer life of the warrant improves the chances of getting a positive result. However this is a personal inclination and not necessarily a mathematically correct one. As with options generally you get what you pay for (not really) and the price at all strikes and expiry dates should properly reflect the risk/reward aspects. Short options can be done repeatedly for the price of a longer one. Similarly many out-of–the-money options can be bought for the same price as a deep in-the-money one. The choice is mostly a matter of preference.

I would prefer the d warrant as well but would never have seen the rather perfect “wedge” that is so visible on the c. You can buy 2x as many c warrants as d warrants and should the stock climb back to where it was last October the c would triple (from 1 to 3) whereas the d would grow by only 2.5x (from 2 to 5), all this assuming all other things being equal which they are not.