Looks like we were correct about assuming a top near the $10 level. The question now is was this the top of a 5th wave or just a third. Have no idea but do think that we should in any event trade down towards the $6.50 level.
Month: June 2012
CNQ update
The stock has followed EW patterns to a T, see previous blogs. Now mixed signals are showing up. Long-term the stock needs to go lower, much lower;
We should presently be going down in wave 3 of C, here at about $26. However the present leg appears to be close to completion which may indicate that it is only wave 1 of 3 of C. Here it is in more detail;
The drop from $41/42 to here is too short to be all of 3 (unless a very large wedge wave C is forming!). This last leg or fifth wave has all the hallmarks of a wedge that may or may not need one more minor push down after which the stock could rebound to, possible , as high as $35. The whole thing would look more like this;
Time will tell but in the end the stock should get to below $19.
RHT, Red Hat Inc.
These fellows are proponents of the open architecture approach to computer software. They trade at a p/e just under 70X. The charts are not perfectly clear, unfortunately, nevertheless I would be inclined to lighten up on this one.
The stock comes from $140 or so in 2000, a 62% retracement could conceivable take it back to about $90. On the other side of the equation there is the rather high p/e, the fact that the stock has done a ten bagger, and that it is trading at the upper end of the channel. Most importantly the last little squiggle is clearly corrective and therefore a drop at least to below $48.50 should be next. Looking at a semi-log chart it is also possible to argue that the correction after the tech crash is coming to an end, this view would rhyme much better with the Nasdaq and other tech stocks.
GDOW, Global Dow update
The Global Dow should provide a nice cross section of the World’s equity markets. Abstracting from where the above charts belong in the “Big Picture”, it is fairly clear to see that since the highs of 2007 we have had three successive drops, each retraced by an a-b-c counter-trend rebound. This in and of itself would imply that the trend is still down. Each of the counter-trend rallies were a little more than 62% of the preceding drop, except the last and most recent one. So far it has retraced only about 40%, so it remains possible that the rebound could go a little higher despite yesterdays drop. In fact it is possible that the down leg is not even complete and that we are just in a 4th wave of that down leg (as labelled). We are not sure about any of this, except that the direction is still down.
Once again applying the head and shoulder concept to the charts – this is actually a very well formed specimen – it is hard to escape the conclusion that the next big move should be down regardless of whatever minute gyrations are needed before getting there. Many individual stocks are following the exact same pattern and have a similar ambiguity with regard to the last drop and rebound. RIO, Rio Tinto is just an example;
