Certainly looks like a triangle, probable a b-wave given the size relative to wave A up. If C equals A, inshallah , we should get to a little over $6.50 which would constitute a gain of over 60%. We will take it if it happens.
Year: 2013
TSLA (by request)
This is by request. I mention that because normally I select stocks entirely on my own which then allows me to chose those stocks that I think I understand, so there is a bias there right from the start which , presumable, should lead to better predictions. “Per request” stocks obviously do not enjoy that bias, so you are warned.
Tesla makes cars. Due to our government’s misguided interventions in this industry there is now an unbelievable over-capacity that was not allowed to destruct itself in the Schumpeter mode. So fundamentally this is not an industry to like. which is not to say that there can be upstarts with exceptionally low marginal costs that can beat out the rest. Tesla may be one of those. From an EW point the only part that is clear is the 3d wave. Before that there are a number of 1-2s and after that a number of 4-5s. So far the drop from $159 is not 5 waves but if it goes any lower it could become that. We expect that to happen and in any event believe that a move from $40 to $160 in five months is a gift that should be taken. The RSI and MACD are already ringing the sell bell. An initial target would be about $90.
RCI.B , T and BCE. The value of an oligopoly, empirically measured.
See also previous blogs on these stocks individually.
Theoretical economics has wonderful “models” that will tell you what the value of a monopoly is, the so called monopoly rent. Oligopolies are slightly more difficult because of the relationships between the , small number, of players. Typically all kinds of supply and demand curves are drawn and by shifting them to the right or the left, or up or down you solve the rent question simple by measuring the surface area created in this manner. The practical drawback is that nobody really knows where the demand and supply curves fit in the model and what shape they might have.
Empirically, every now and then, real life provides the opportunity to figure out what the “rent” is actually worth. POT, Potash Corp recently gave a good indication of how high such a rent might be. In Canada the above three telecom companies control about 90% of the market. Our government would like a little more competition and is consequently contemplating selling certain blocks of frequencies and allowing the sale of one or two smaller players to entice foreign companies to enter the fray, in particular Verizon which is about three times larger than these three combined. The complaint is that this is so un-Canadian because we are, as a nation very fair, perhaps, but why are we then the oligopoly paradise of the world?. Full page adds trumpet the unfairness and even the labour unions are weighing in on the argument. The whole thing is almost pathetic and is reminiscent of the silly arguments BCE offered a few years ago to go private, quite unsuccessfully by the way. Cutting through the propaganda we can observe that all three stocks recently dropped by 20 to 25 percent.(wave 1 of C down). Presently we are in a wave 2 up that is not yet complete. So, all other things being equal (they never are!) it follows that the mere suggestion of Verizon entering our market, and then the announcement that this will be postponed caused this drop and ergo one might conclude that the oligopoly rents are (at least) in the order of 25% and perhaps a lot more. Despite all the pathetic demagoguery the past weeks or so, this is something the average Canadian has known for years!
After a bounce we would unload all three.
BAD update
We had to search for a stock where we called it incorrectly, this would be a good example as we thought it was a sell just under $40. We have learned that all things good are bad in economics, and all things bad are good. We know this stock sucks, literally, so we were warned that that might be good. It was. We are still not at all sure of what to make of this count, perhaps an extended 5th wave? In any event things are going so well with this company that that must be bad. We would sell, again.