Month: March 2012

INTU, Intuit

Hamilton

This company makes software, particularly the kind that is used to calculate and file your taxes electronically. Things should be going well at this time of the year and they are. The company just reported a 62% increase in profits and the stock briefly peaked at $62.33. For Fibo enthousiastes this is a good reason to be alert. Here are the charts;

intu mar 2012 bintu mar 2012 s

Perhaps the count is wrong, perhaps not. The p/e is above 25 pretty lofty by any standards. 49.5% of Americans do not pay any income taxes at all. In Canada that figure may not be all that much different but people need to file anyway. Students etc. to accumulate RRSP room and get a GST rebate for rentals . Older people for GST, OAS supplements, real estate tax rebates and so on. But you can get the same package for a single payment of $20,see http://www.genutax.ca , and get an updated version each year for nothing. Also, maybe some day the CRA/IRS  themselves will wake up and decide that it should provide these services at no cost considering the huge benefits these agencies reap from not having to “input” the data. This is a sell.

HRB, H & R Block, a do-not-do-it-yourself outfit, that also helps with tax filings and a few additional services, is still trading at about 1/3 of its peak value years ago. It has a p/e of about 13

UTX update

Hamilton

utx feb 2012

Back in July, early August last year we were convinced that this one had only one way to go and that is what it did, right to an initial target of about $65. This stock hit the lows at about the same time as most stocks. What is by no means clear is how one would get to 5-waves down for wave 1. I suspect the 5th wave of wave one was a failure and either occurred immediately after the low (blue) or in October (black).That was good for a loss of around 30%.

What I certainly did not expect is that the stock would recoup 75% of that loss and that it would take such a long time. Perhaps this is what 15 trillion in bank reserves and other stimulus  does? In any case today, looking at this rebound, it is quite obviously an a-b-c and a fairly precise one at that. The b is probable a triangle and the up-legs, a and c are either as shown in black or in red. Variations are possible but the main message here is that, for the moment at least, this is a correction and therefore the downward trend should resume any moment. This is a sell as the target remains as before (see previous blogs).

WFT, West Fraser Timber

Hamilton

wft b

These guys make dimension lumber and consequently one would expect that they are very sensitive to the housing industry, particularly in the US where much of this stuff goes. There are a few “problems” with the count as shown, but the broad brush picture seems to be correct. Notice that the top is reached in early 05 (perhaps even in late 04 ) so the stock ran ahead of the housing market itself which supposedly peaked in 2006. The stock then drops over 5 years to lose 64% of it’s total value. It bottoms roughly (a little late) with the rest of the market and then, in less than 2 years, climbs straight up to a new all time high of $62.23,  just a fraction away from the ideal Fibo  # 61.8 . Given the speed, and the fact that this is happening well before there is any recovery in the home-building world, this must be a B-wave which implies that it is “corrective” and therefore, by definition, a new low should be anticipated (or a far more complex pattern). The details are shown below;

wft swft vs

Notice that this B-wave is almost perfect as the two upward components are almost precisely vector equal, topping in April with the markets in general , but not the home-building industry. From there there are seemingly two more a-b-c’s , the first down and the last one back up. We suspect that the one down is in reality a 5-wave structure with a relatively small first wave. The last a-b-c brings tears to your eyes by an unbelievable display of symmetry. Again the message is that this move is corrective and therefore the next move should be down, down to about $20 or lower. We shall see.

FVI, Fortuna Silver Mines

Hamilton

fvi feb 2012

Fortuna just would not go down as expected. It has now spent 10 months going nowhere. The pattern, however , has become clearer. There is either a triangle up here , or a series of 4-5’s, either way the stock should soon drop to about $3.50 (wave 4 of 3 and 62%). This does not bode well for the precious metals as a whole.