Month: July 2012

BRE-X

Hamilton

bre-x

It is difficult to get a chart after a stock has died. Here is the best I could find. It is textbook EW. 5 up and 3 down only in this case that was all there was. This stock traded on the TSE, not the Venture exchange so it was “safe”, almost a blue chip. Like a good novel the stage was set in a far away country, one where head-hunters were still held in high esteem, Borneo. The characters were also interesting, an ex money-market trader with a taste for booze, not uncommon by the way, a Dutchman who never lost his head and a side-kick womanizing fellow from the Philipines. SNC Lavalin  and American Barrick played minor but crucial roles. The best part, in my opinion, is this guy that is dropped out of a helicopter over the jungle without a parachute. He is found the next day! You would be lucky if you found a white 747 there within a month. We believe what we want to believe.

A report came out the other day that perhaps the number of psychopaths in the financial industry is as high as 10%, they don’t care. Earlier we saw that a majority of MBA students at Harvard thought nothing of cheating if it served their cause. The world is losing its moral compass and the temptation rises faster than the price of gold. So if you are caught in another stock scam, make sure you are at the winning end.

BGM, Bakerville Gold

Hamilton

Bakerville is a small place in BC. Once upon a time, about 1860, it was the largest town north of San Francisco and west of Chicago. It was the focus of yet another gold rush  along the Western coast. This company has a big stake a little north of this particular spot, so one can say with absolute certainty that there is gold in them mountains but, and this is the question, how much? Well to start, 10.6 mln. indicated ounces at Cow Mountain, an Alpine setting  that would make Julie Andrews do one of her favourite things. Furthermore there was, according to a company statement, geological potential for , possible, 90 mln. ounces at the mountain. An absolutely huge amount. Some have expressed doubts about the methodology used and therefore the results but I am gullible to a fault and just look at the waves;

bgm b

It is good to start off big as it puts things into perspective, especially if your newspaper only shows a chart the size of the little square in the bottom right-hand corner. There are a few points to wonder about. What happened during the 4 years the stock was AWOL? And then the last 6 years the stock shows no pulse at all. Needless to say, the stock was never really at 12000, that happens only due to reverse splits.A chart from the G&M reveals that there is life;

bgm mbgm s

From the low of 15 cents in 2008 the stock moves up in a perfectly clear A-B-C, counter-trend, correction. Ergo the stock should trade below 15 cents someday soon. There is no plausible alternative count that I can see unless one assumes a “failure” in the latest leg down in which case we could conceivable have just started a new bull. I would tread carefully!

BAD, Badger Daylighting

Hamilton

Daylighting is the illumination of indoor spaces by natural light. Definitely not what this company does. It sucks. These fellows have about 500 trucks with huge airtight tanks on them that they use for all manner of construction work, mostly in places where the sun does not shine. The process is simple, make mud and suck it away. It is very popular as it causes very little collateral damage. Once upon a time they were an income trust but converted back to an incorporated entity which makes getting charts a little difficult. This one is from the Globe & Mail;

BAD 2012 l

In 2002 I had this stock in my cross-hairs for a buy, but being my worst enemy, never got to pulling the trigger. Now we are at $27.05, recently. It was brought to my attention as it is one of Mr. Peter Hodson’s stock picks (see FP July 7). He has an impressive record and left his post as president of Sprott, reportedly for the simple, but impressive reason, that he had trouble stomaching the overall predatory nature of the business, quite an admirable confession or, if you prefer, accusation. This time I think he might be missing the mark.

The recent high at $27.50 is $4,55 higher than the highs back in 1998, or about 20% higher. This is well within the acceptable range for B-waves and even a larger A-B-C (in green) with a target of $32, though borderline, might still qualify. Even so,  it is very unlikely to be correct. Looking at just the C we get;

Bad 2012 s

A very nice 5 wave sequence, with a throw-over in the 5th, a dive down for a and a retracement to the line for b, c should follow down to the lower trend-line and then wave 4 of previous degree at about $16 (the two charts do not have the same resonance, so there is a difference in the readings!). One would expect this to occur even in an ongoing bull market, too big a drop to ride out in our opinion.

If the B-wave concept is correct, the stock will fall at least to $10 if not more. This is not a high-tech business. In its rudimentary form it is what all rural people will be intimately familiar with as sewer or sceptic tank cleaning, a mom & pop business that is sensitive to real estate transaction volumes. In any event this is an excellent example in economics where bad is indeed good, or should that be was ? As always time will tell but we would sell now.

BCB, Cott Corp, update from Jan 27, 2009.

Hamilton

The nice thing about keeping a blog is that there is a record of your comments, it actually measures or records the precise words and not how you remember them. The more often I read old blogs the more amazed I am how accurate EW can be, of course I have a choice which ones to “update”. This time it is Cott. It was once the darling of the stock exchange, as well as being involved in accounting scandals etc. Three years ago we put this out;

bcb 2009 text

The blog is still there. The idea then was that a clean 5-wave down was complete. Ergo at least a rebound was due (unless the stock cratered) to about $4 to $7. So what happened?;

bcb jul 2012 sBCB jul 2012 m

Well it shot up to $9 (even $10) and is still almost at $9 three years later. That is a nine bagger right there!By the way, keep in mind that the old chart is only the 5th wave, from $20 down, not from $45! From here it is reasonable to expect this stock to climb to about $14 if c=a in a rebound correction from the lows. Higher levels, $18 for a 38% retracement or the level of the apex of a triangle are also very reasonable. That all this is “reasonable” becomes clear when you look at the big picture;

BCB jul 2012 vb

The top for this stock was actually in 1993, accounting irregularities were alleged to have occurred earlier. This whole structure is a very good example of a large, flat with all three waves approximately equal. The arrows are drawn schematically and run perfectly parallel . Note that over the 16 years that this thing took to complete, the arrow is off by at most 1/2 year and less than 25 cents from the parallel lines. ( For the sake of simplicity I have  started and ended the three legs to fit the geometry, in reality the A wave may have bottomed at the first low.) The present target between $14 and $20 is a bargain compared to KO, Coca Cola, assuming you believe in carbonated sugared water.