Month: May 2011

CL , Colgate Palmolive update, see also April 6 blog

Hamilton

 

cl may 2011 cl may 2011s

Colgate was up more than $2 today. As expected it is increasing the speed at which it is looking to get to the ultimate target. As indicated earlier two counts are plausible. Most elegant of the two is the notion that we are in a 5th wave wedge, now in its 7th year. This is because of the overlap that has occurred. A very plausible alternative would be a 1-2, 1-2 start which then requires a 4-5, 4-5 finish to complete the 30 year 5 wave sequence.

There may well be good reasons to prefer one count over the other but it is purely academic as BOTH counts call for a fairly drastic drop at the very least to $55, but more likely $45 or even $35 where the 62% retracement level lies. By the way, this is not a bearish call, just one that recognizes the normal ebb and flow of stock cycles.

My target for a top was about $90. Now that some time has gone by – a month – a more accurate guesstimate would be $92. At a rate of $2+ a day we could be there within a few days!

cl options may

In the mean time the 85 strike 2013 put is moving towards the expected level of around $7, in fact, should the stock move to $92 or about $5 up from here with a delta of about 0.5 (we are at the money) the ask could drop another $2.50 which would bring it to $6.40 all things being equal.

Some may wonder why , if you expect the stock to go up by about $10 or a little more than 10% you do not recommend buying it. The simple answer is that I do not like playing 5th waves from the long side. The new high may only be marginal and the risk is at its highest!

CCO , Cameco update

Hamilton

CCo may 2011 big cco may 2011

Cameco is performing in a text-book manner with each and every wiggle conforming to EW rules and guidelines. Here is a refresher. The stock did an A-B-C counter-trend rally after the lows of Oct 2008 at roughly $15. This may only be part of a much bigger correction, we simple do not know. But the stock will have gone down in 5-waves from the $44 high and should therefore rebound perhaps by one half of the drop, about $10 to $11 depending how low we go. Today we are on the big fat line connecting the lows and that may hold were it not that the pattern is not (yet) complete. A minor 4th and 5th wave (of 5 ) still seem to be needed which could take the stock to the $22 level. This is the extreme so it might be smart to buy a little above that. The gap-in-the-middle-theory would suggest $24 as ideal.

The target is at least at $32 which is where the gap starts closing and where there is a triangle wave 4 (of 3), both “normal” targets. Even at today’s price that would be a nice return, assuming this is correct.

K , K wt C update

Hamilton

kmay2011 kwtcmay2011

See earlier blogs. Kinross keeeps dropping  nicely and could, arguable, be completing the complete pattern. Do not buy the stock , buy the warrant instead. The stock could reach the $13 level, perhaps, but in this market stocks tend not to reach the bottom all that easily. For the warrants this matters very little as most of the value is time value which does not erode that fast anymore. Under $1 the warrants present a reasonable gamble on this stock.

G WT G, more on warrants.

Hamilton

On Jan 28 we recommended buying these warrants when they were trading at about $1.62. Our hope was that they would perhaps drop to $1, either way they should triple in value after that and of course, if you miss it all together nothing is lost other than an opportunity. Here is the chart , after the fact.

gwg may 2011

They way to do this, in my opinion, is to put in the order in advance. Suppose you bought that day at $2 in the expectation of tripling your money, you would put in the sell order at $6as soon as you are filled on the purchase. The simple reason for this is that these warrants are essentially derivatives and consequently can decay rapidly if near their expiry date or their strike price. Always settle for what you can reasonable get. For the Kinross warrants that would be about $3 if you buy at $1 or below.