Month: December 2011

WAG, Walgreen, symmetry and RIM

Hamilton

wag 2011

Walgreen the US medicine cabinet reported earnings and supposedly the results were a little disappointing but that is not the issue here. What is, is that the stock made a classic B-wave of the kind that I have shown at least two dozen times or more. This one is particularly interesting because the two legs in the B-wave, A and C, are absolutely, precisely to the tick, perfectly equal both with respect to the distance travelled and with respect to the direction, a.k.a vector equal.  I have never stopped being amazed how often this perfect symmetry occurs.

   We have another one that has done the same, albeit in a bear market as apposed to Wag’s  correction. Guess what, it is none other than RIM!

RIM dec22 2011

First of all, if you look at the green arrows, deliberately put a little to the left, you will see that the arrows are absolutely perfectly vector equal! This probable occurred yesterday when the stock hit a low of C $ 12,80. The chances of a turnaround happening, seemingly by accident, at exactly such a moment are pretty high as markets for some inexplicable reason love symmetry.

The other , in my opinion , fascinating aspect is that history does repeat itself or, at the very least , it rhymes.  The drop in the small circle back in 2000 and 2001, is about 90%, just eyeballing it as I do not have precise charts. The drop this time around, from $150 to $12,80, is just a little over 91%. Furthermore, the patterns are both A-B-C’s where the A and C legs are vector equal (the small one is a flat and the big one a zig-zag).

It is not an accident that only yesterday every Tom, Dick and Harry fell over themselves to downgrade the stock and find reasons to stay away from it. Today there are rumours of at least three major suitors thinking about becoming a white knight, Nokia, Amazon and Microsoft among them. Now the word is that RIM is worth more dead than alive.

Time will tell. History may not repeat itself again but there may well be a few bucks to the upside. This is certainly the case if the C wave from $95 to $13 is indeed a diagonal!

Walgreen, by the way, probable completed a first 5-wave sequence down and could rebound back to about $38. Then it is a sell.

DH, David + Henderson Corp.

Hamilton

These people print cheques. Cheques might be going out of style but not just yet. In the meantime they make them more and more stylish, small works of art, so they can charge a lot more. They have a captive audience as this company has arrangements with virtually all the banks and are paid a commission on each order.

Here are the charts;

dhdh s

There are 3 possibilities. We have a big flat starting in 2006 with A down into the lows of 2009 followed by a B-wave up. We are in C that should ultimately lead to a new low. Next the whole thing from 2006 to 2009 is one big wave 4 correction followed by a 5-wave 5th wave that fails to make a new high. We should fall back to the 4th of previous degree which is the 2009 low. And then there is a third possibility, which is that from the lows of 2009 the stock started a brand new bull market and is now in a wave 2 correction. This is extremely unlikely as it goes against the grain of most other stocks.

As we have no idea what the proper count is for the drop this year, other than that the stock is doing pretty well what dozens of other stocks are doing, we expect a rebound to perhaps $17 and then back down. Use a stop at $14 now.

MFC, Manulife Financial

Hamilton

 mfc dec 2011

In the Canadian Financial Planner the following comment was made with regard to Manulife,s “Income Plus” product that came to market in 2006;

Manulife income plus comment

In real life the supposed waste of time became a huge headache for Manulife that believed in this concept. A little chart of the TSE makes this abundantly clear.

tse dec 2011

Clearly in 2009 we spent sometime during which this 10-year time horizon assumption did not work out, and now again we are close. Even though the 10-year period has not yet passed for any of this Income Plus product as it was only launched in 2006, it is not looking too good. We are now going into the 6th year and virtually all that was underwritten for this product is at break even at best, so most is underwater. Last year Manulife “hedged” part (1/3?) of this exposure while it was underwater. The problem with hedging at that point in time is that it is almost the equivalent of taking the loss.

In any case this hedging got the analysts all excited, one in particular I understand at RBC, that led him to get bullish and rate the stock an outperform in the spring of this year when  MFC was trading at about $19. Today, miraculously, with the stock at a little over $10, the analyst has this eureka moment and changes his mind right out of the blue and now has an underperform rating on the stock (and all other lifeco’s). Did your broker call?

We have referred to this stock as the canary in the coalmine and recommended selling it early this year. Today it looks like a buy for a trade. After that this stock is toast if the market goes down further.

JEF, Jefferies Group Inc.

Hamilton

This firm got caught up in the MF Global debacle but today’s reported earnings were better than expected, giving the stock a little boost, which might become a lot bigger. Here are the charts;

jef 2011

No EW here, just a straight line to show where we are in the context of the past 11 years. Short term charts support the idea that we might get a turnaround of some measurable proportions soon;

jef m 2011jef s 2011

In the worst case we are in a wave 4 that should take us to around $16+, perhaps even $18. Higher levels are possible but I cannot figure out a count that fits well. The stock trades at a p/e of 9 or so and actually has a yield of 2.4%. Use a stop at around $11.