Month: July 2011

LXK , Lexmark

Hamilton

lxk b

I could not get a longer chart to see what this stock did during the tech. bubble, so I am simple assuming that the near $100 high shown on this chart is THE high (by the way, another fitting example of the Mnt. Everest syndrome). From that top the stock corrected losing 77% of it’s value and did so a a very clear zig-zag, actually an a-b-c X a-b-c , in which the X retraces about 62 % of the first a-b-c. These patterns can repeat 3 times which would lead to an a-b-c X a-b-c Y a-b-c. More than 3 is not possible (stated more correctly, none have ever been found!) In this particular case it is highly unlikely , but not entirely impossible, that a third a-b-c is forthcoming . That would take the stock to $0 or below. So I assume that the $15 low is THE low. If so it follows that a new bull market started at that point.

lxks

Notice that the low is not in synch the general market, it occurs 4 months later. If we are in a new bull we should see 5-waves up to start the process. This is wave 1 up of the new bull. Then we should get a (deep) correction for wave 2. So far we have an a-b-c down, but the c is probable not yet complete. An ideal target would be around $25 where c=a, 5-waves for c would be complete and wave 2 would have retraced about 62%. It does not have to do that but it might. If it does it should be a buy.

By the way, this computer hardware manufacturer trades at a P/E of about 7.

CWT.un, Calloway Real Estate Investment Trust

Hamilton

CWT.un

Calloway trades at a P/E of about 85, according to Bigcharts, yet it earns slightly more than 6% in distributions. No idea how well the fundamentals stack up , but IMO this one is pretty well priced to perfection, just as it was in ‘07.

EW wise there is some ambiguity in that the drop in ‘07/’09 could either be a 5-wave move or an A-B-C. But, either way the next significant move should be down by about $10 even in the optimistic scenario. There does not appear to be any real immediate upside all though some might argue that double-topping is just around the corner. In the highly unlikely situation that this actually happens only $4 would be added to the value of the stock, ergo the risk/reward ratio is very much against you. Sell or use a tight stop.

R Romarco Minerals.

Hamilton

R june 4 2011

R took it’s time to get to the ideal target of $1.50 (actually it is $1.30 as that is the base of the wedge) . If you did already buy it there is no problem but if you have not this is again a good time. Look for $2.50 before the year is out , perhaps higher.

TRE, Sino Forest. Monkey see, monkey do!

Hamilton

TRE July 4 2011

So Muddy Waters killed the stock and Wellington has reignited it. Neither is exactly true but it does show how totally mindless investing is. I recommended this stock a fortnight ago (that is 14 days!) at , say $3, you could have bought it their or even 40 cents or so lower. Today you can sell it for $4.50 for a gain of at least 50%, which,  by the way, is 1250% per annum not including compounding. The stock may go higher yet but right now the correction from the lows looks a lot like an a-b-c. As mentioned in my previous blog, this could – repeat, could – simple be a fourth wave. Time will tell but if it is, a 5th down should follow and you can do the whole thing again.