Month: September 2013

YUM update

Hamilton

YUM sept 6 2013

A fortnight or so ago we suggested that this stock was a sell. The wedge appears to be completed at about $75. As each subdivision in this wedge like structure must itself subdivide in a three wave affair, you cannot ever be absolutely certain that you are at the end of the ride. Even so you should always assume that you are simple because the upside potential is considerable smaller than the downside. An active trader might consider buying back his short and taking the 8% gain, all other mortals should stay with the original trade as either way $59 is on the horizon.

ABX update

Hamilton

ABX sept 6 2013

SFF.VjcABX could go anywhere from here, we suspect it will be down but , frankly, we couldn’t care less. The idea that one has to ALWAYS be invested fully, on the grounds that you might miss more up than down opportunities, is complete and total nonsense which serves more to hide the brokers incompetence than help the client/investor. The same applies equally to being diversified. Our philosophy is that you should not be invested at all (save for T-bills or something similar) un till such time that you actually have an idea and then go for it wholeheartedly by using perhaps as much as 1/4 of one’s assets. ABX is a good example. From $15 to $21 we made 40% in two months, or, if you prefer, 240% per annum not counting compounding.

In the case of ABX the hardest part is determining where to enter the trade. If done too early the gains will be dramatically eroded but oddly enough, the ultimate outcome does not change all that much. Suppose you bought at $15 but the stock went to $12, provided you held on you would still make the same amount. Why $21/22 to get out? 1. That is where c=a if you get the minimum a-b-c correction. 2. That is where the 4th wave of previous degree lies. 3. That is where the RSI goes to 70 or above. 4. That is where the MACD peaks. 5. That is when we have an acceptable EW structure for a rebound. 6. There were at least 20 other gold miners displaying the exact same pattern. 7. The mood was pretty negative, some even predicting the total demise of this company. There are more reasons but this should suffice. None of them apply NOW so why hold the stock. All this , by the way, is not that difficult. There are at least 20 stocks just this past 1/2 year or so that were presented in this blog for, essentially the same reasons, DELL, Nokia, Best Buy, TRQ , JCP maybe etc.etc. are just a few examples

RY , Royal Bank update

Hamilton

ry sept 5 2013

Back in February of this year the stock reached $65. That was the highest level we could come up with using a very bullish diagonal or wedge structure. This one is so big that we have serious doubts about the correctness. A simple B-wave from the $25 fits just as well and would even allow for a slightly higher price as the top has no significance in that situation. Either way, a diagonal of unbelievable proportions or a simple B-wave, the stock is done for all intents and purposes. It took seven months to add a single dollar!  In both counts the “target” is well below present levels, perhaps as low as $15. But this is Canada and this is the Royal, like potatoes to the Irish the Royal is the main dish for the Canadian investment industry . No self respecting investor would want to get caught without owning at least a bit of it, particularly in uncertain times, so it will take a while but once the process does start it should accelerate rapidly.

MSFT, Microsoft update

Hamilton

msft sept 4 2013 bmsft sept 4 2013 s

The only thing that was always perfectly clear was that Microsoft traced out a two year long triangle. Given the size and duration there can be little doubt that this is a b-wave, the pause in the middle so to speak, except that the middle is not necessarily in the middle. At one point we therefore assumed the whole thing was complete at about $33 and that the stock would drop. It did, but not as far as expected. Now there are two possibilities. Either the stock is doing an a-b-c X a-b-c (double zig-zag) or a simple a-b-c, both from the lows. If the former applies the stock has seen its best. However in the latter case the c-leg should subdivide in 5 waves itself and probably as a wedge. This would allow one more high near $38 where the trend line of the wedge intersects with the double-top line. This could take about 1/2 year to complete which does not fit the overall outlook very well. Best way to play this is with a tight stop just below the lower wedge line. Should the stock manage to get back > $34 we would sell. Fundamentally people wondered where the growth would come from. Now with the Nokia deal under the belt people may conclude that growth is finnished.