Month: June 2012

NAV, Navistar

Hamilton

NAV 2012nav b june 2012

Back in August of last year it looked like NAV was going to do a triangle (it was definitely a 4th wave), instead it did a zig-zag but the implications are the same, that is the stock will go down in a 5th wave and that is what it is doing. The whole structure is looking to become a 3/4 year “flat”, that is a sideways move that fits in a parallelogram, more or less, as the C leg is known to dive a little deeper. In detail;

nav s june 2012

An ideal target would be around $10. We are presently in wave 4 of 5 of C.

KO, Coca Cola

Hamilton

KO june 2012

About 3 years ago this stock looked like a sell already at about $65, then again at about $70 and here we are at $78. Now it really looks like a sell, furthermore a very plausible count is again presenting itself, as shown on this semi-log chart. One can never exclude the possibility of an attempt to double top (about $90), but otherwise everything is in place for a rather big decline. The initial target, as usual, is the 4th of previous degree, just under $20! In more detail;

ko june 2012 sKO june 2012 vs

What adds a little confidence to this count is the rather obvious “megaphone” which is actually an expanding triangle and therefore has to be a fourth wave (of c of B)! Moreover we are at the top of the channel and the RSI and MACD are both going down.

Fundamentally this stock trades at a high p/e of 20+, yields 2.7% and has a Beta of 0.43. If you own it, sell it, if you do not own it , it is probable a good short but if options are used make sure you have time on your side.

Nikkei update, housing and (S)pain

Hamilton

Nikkei june 2012

This chart is from NowAndFutures.com , an excellent website with lots of information. In blue we have the Nikkei 225. It is very slowly following the script, which is an A-B-C with the C as an expanding diagonal (wedge). Each leg in that wedge is itself an a-b-c and we are about to complete the b in the third leg down. This one need not go to the trend-line. Eyeballing it would suggest something like 4000 would be just fine.

The green line is more interesting. Remember when the Emperor’s palace gardens in Tokyo were supposedly worth more than the State of California? After rising at least 100% the index drops by more than 60%. Roughly, over ten year periods, the value of real estate is cut in half and this is on an island and they are not making anymore of it.

Applying this wisdom to Spain one can conclude that things could get a lot worse. Going into the real estate peak, Spanish banks lent roughly an additional 700 bln. to this industry, on top of the 200 bln. already outstanding. If, for the sake of argument, values were to drop by 1/2 as well, the banks (or caja’s) would  stand to lose about 350 bln. Euros. The 100 bln. Euro package, with or without subordination, directly or indirectly, is 250 Euro short. Will there be an encore? By the way, Spain external debt is about 2.2 trillion.

COST. Costco

Hamilton

cost june 2012 bcost june 2012

Costco is approaching the $100 level. It seems to be impervious to what happens in the macro economic world, or perhaps it is just well suited to thrive in that sort of a competitive environment. We are not sure how to label this in EW terms, but we are pretty sure that this stock is forming a wedge in a Mnt. Everest type of peak. It is doubtful that this stock will get much above $95 and since the next stop could be some $50 lower we would get off this train, plain and simple.