Month: February 2014

FNV , Franco Nevada update

Hamilton

fnv feb 15 2014 bfnv feb 15 2014 s

We have made some pretty good calls on this stock despite , usually being too early. We bring it up again because when looking at a number of different gold stocks things start too look pretty positive. Furthermore it is not unreasonable to expect gold to go up as stocks decline, the common factor there being more QE. Franco Nevada is trading in a troublesome way for such a scenario to be correct so some caution is advisable.

Franco is sporting one of the clearest B-waves I have ever seen. Of course it turned out to be much larger and longer in duration than we ever expected but now that it is done (we think) it is a uniquely well articulated B-wave. The problem, of course, is that B-waves are counter-trend corrective moves that are invariable entirely erased and most often even a little more than that. On the balance of probabilities, just to use a legal phrase, this thing should come down like a rock. It follows that tight stop-loss orders should be used against any long gold/gold stock position!

FNV is about to double top. It has retraced more than the other gold stocks. This is partly the result of it being a royalty collecting company rather than an earth moving operation. Many of the idiosyncratic risks are consequently avoided, at least initially.

TRQ, TSX, Copper and so on

Hamilton

The other day there was this fellow on BNN that suggested that the TSX has broken lose from its correlation with copper. He is pretty good (Price?) despite sometimes looking like a hippie. Here is the argument:

tsx feb 15 2014Copper feb 15 2014

The InfoMine Copper chart is expressed in US dollar terms and the TSX in Canadian; both charts cover roughly the same time period. The correlation is not perfect but does get a little better if you make adjustments for the exchange rate (a low in 2001). Certainly for the past few years the correlation is pretty good, but notice that in the last year the two have parted company with the TSX going up and copper going down. Perhaps Canada is more a petro country than a copper country. In any event I have drawn a line through the TSX chart which is my best effort at finding the middle of the range for the past 25 years. If that line holds (on average) the TSX should be at about 15000 in 3 years time (starting where it is now, not where it is on the average line). That works out to about 10% for the whole period or roughly 3 % per annum. The question is “Why would you do that??”. Why not buy TRQ instead?;

TRQ feb 2014 bTRQ feb 15 s 2014

We thought (see previous blogs) that this stock was a screaming buy. It did go up about 30% but has settled down back to $3.25. A drop to $2  ( a wave 4 of prev. degr.) or so cannot be completely excluded but we prefer to think that the stock is already on the way up. The initial target regardless of the path it takes, is around $5.50 (the wave 4 of 5 of C triangle). The copper price is barely relevant and it has a lot of gold as well. In short , if you like the TSX because it correlates well with copper you have to like TRQ more. If you like the TSX because it has detached itself from copper, you should also like TRQ more as it is down 90% rather than about 10% for the TSX.  Buy low sell high, not buy high and sell low.

BBY, Best Buy update

Hamilton

bby feb 13 2014 bbby feb 13 2014 s

Best buy looks like a buy now that is has dropped like a stone. It probable is for a few dollars but looking at the big picture we do not trust this stock. The pattern looks a lot like a large A down followed by a B up. Next would be C down and presently we should be in 4 of 3 of C, so 5 of 3 and 4 and 5 of C still to go. This could get the stock to $10 and lower. We would leave it alone.

ABX update

Hamilton

abx feb 2014

Un till a better picture presents itself we will view the action over the past seven/eight months as a corrective , counter-trend A-B-C. It stalls every time it hits the 4th of previous degree level which it may yet marginally break , but time seems to be running out. It results today were not particularly promising.