Month: July 2012

SAN , BBVA and the IBEX update

Hamilton

SAN Jul 25 2012BBVA jul 25 2012

IBEX jul 25 2012

Santander, Viscaya and the Madrid index are all at , close to, or even a little beyond what are “normal” reasonable targets under EW. The index could still do another 700 points or so to reach the 4th wave of previous degree but it has already lost precisely 62% of its value. Santander has maybe another 60 cents to go to get to the 02 lows, the 4th wave. Viscaya has done all that and is now pennies away from the trend line of the wedge wave c of C.

What one would expect in EW land is a turnaround somewhere here, if not for the IBEX as a whole then certainly for these two banks. To state the obvious , there is only another $4 left to the down side. Keep in mind also that Santander is the largest bank in the Eurozone and Viscaya is not that far behind. Both have extensive operations outside of Spain itself. If ever there were banks that fall into the “systemic”-risk category, it is these. Who knows, maybe just somehow they will pull another, bigger, rabbit out of the hat. If they are buys remains to be seen, time will tell etc. But in any event these banks are not good shorts.

Here they are in more detail:

san detail 2012bbva detail jul 2012

In the SAN case it is possible to draw the wedge less sharply which would change the count in such a way that we have only completed wave 3 and are now starting wave 4, that does not apply to BBVA at all. The RSI and MACD are not confirming the new lows.

BIDU, Baidu Inc.

Hamilton

BIDU 2012BIDU s 2012

Baidu, the Chinese equivalent of Google reported better than expected earnings and shot yp as a result. In the detailed picture it is clear that the 5th wave of C was a “diagonal” and consequently the stock should go at least to $125, and do so fast. In the big picture a case can be made that the entire sideways movement for the last year or more is a flat A-B-C, perhaps regular, perhaps irregular but almost certainly a flat (3-3-5). Chance are that this is then a 4th wave of the larger up trend that has lasted for all these years. If correct a 5th is missing, or seems to be missing. (There are a number of different counts that would lead to very different conclusions). Use stops when playing this from the long side.

AOI.V, Africa Oil Corp update

Hamilton

aoi JUL 2012 BAOI jul 2012

Whenever you hit a top, your next expectation is that the stock will drop back to the 4th wave of previous degree and erase about 50 t0 62% of the gains it made in the entire preceding up leg. The 4th is just under $6.50. 50% is about $5 and 60% $6 so that could normally take the stock to $6 or perhaps $5. So far the stock has dropped to $7 and consequently has not (yet) fulfilled these two reasonable expectations.

Next correction always take the form of an a-b-c, which can be a flat 3-3-5 or a zig-zag 5-3-5. The drop from $11 to $7 is hard to count but almost certainly does not have the required b part un less it is the triangle as shown. For a 4th wave it is already rather big so it is a better bet that it is a b-wave triangle as shown in the alternative. That implies that the c is yet to come. Add it all up and it is probable too early to buy. As they say, good things come to those that wait.

By comparison here is another Vancouver stock that has almost completed the ride down, but much deeper than AOI;

CUA JUL 2012aoi JUL 2012 B

AOI is repeated here, on the left, to make the comparison easier. Of particular interest is the RSI, in the case of CUA it went to “oversold” levels, AOI is still comfortable in the middle of the range at about 50.

NXY, Nexen autopsy

Hamilton

Cnooc agrees to buy Nexen for $15.1 bln. This is China’s largest offshore oil and gas explorer. Works out to $27.50 per share, a premium of 61% over the July 20 price of the stock. Here are the charts;

NXY lNXY s

It is always easy to predict the past but equally useless. It does , however, serve a purpose to see if the application of EW might have shed some light before what happened. Looking at the big chart there are two triangles, one in wave 4 just before the top and one in wave B of an A-B-C correction. The B-wave triangle could be larger or smaller depending on where you start it. The subsequent “thrust” down , like the 5th wave of the 2008/9 debacle, is a “failure” in a sense that it did not result in a new low. Failures do not occur often and here there are potentially two, both suggest a stronger market beneath the surface. Usually stocks return to the highest level in the triangle, the top of wave a, which is exactly what has happened.

Looking at the short-term chart it is obviously next to impossible to count the waves in the “thrust” down, however what is fairly clear is that the last a-b-c points to an overall trend that is now up. Taking all three, the triangle, the failure(s) and the a-b-c at least the outcome is consistent with EW. The 61% premium is the icing on the cake.