This expanding diagonal triangle is picture perfect. The line is at about $8, the retracement should, repeat should, be up to the starting point which is at $23 and all this should happen relatively fast. A buy here or a little lower!
The XAU may also be sporting one of these diagonal expanding wedges;
Alternatively you can add a 1-2 at the top and a 4-5 at the bottom. Here the RSI is lower than it has ever been during the past 5 years.
We are wrong and will continue to be wrong on VRX, Biovail just in case we forget. This company has overtaken Royal Bank and is now the biggest on the TSX. In dollar terms it is twice as high as Nortel ever was and just as then with Nortel very few people understand what they do. It is almost as if all the sales of commodity stockes are finding their way into this stock
Technically speaking we are going straight, that is vertically, up. This is where things have to exhaust themselves. Looking at it on a semi-log scale the count moves up a notch but more importantly we are hitting the trend line. These channels tend to be uncannily accurate as can be seen on the way down as well. At a p/e of 122x this stock is trading entirely on hope. Just as with Nortel we would urge you not to participate any further.
A few years ago we had a tentative target of $9 for this stock. We are surprised that it is getting there, after all this was one of the darlings in the energy space. The count is virtually unchanged from what we had back then and we would expect a bottom somewhere between $10 and $5. The line connecting the lows, which can be quite a bit off over this length of time and with this level of resolution, runs at around $7 which , in our opinion, is hopefully going to stop the decline. In any event you would be buying low compared to the previous 7 or so years.
We were always of the opinion that the steep drop late last year was a 5 wave structure indicating the start of a bear market, in this case wave C. There are always other possibilities, it could, for instance, be part of an a-b-c irregular correction so one has to be careful not to jump to conclusions. 7 1/2 months went by and the index came within 161 points of making a new high. All hell seems to have broken loose after that. We seem to be in what Don Cox of Basis Points fame used to refer to as a cascading waterfall. He is the only one I know that could effortlessly mix Greek mythology with economics. The problem with the waterfall pattern is that from an EW perspective it is hard to pin down exactly where you are. Having done about 1200 points, a little over the obligatory 1000 points, our best guess is that we are almost completing wave 1 of 3 of C. Next is wave 3 of C.
Fundamentally this could work. Our economic backbone of commodities is pretty well in trouble throughout the spectrum, from oil to gold, lumber to potash with the only bright spot being hay in Sasketchewan going for $200 a bale (roll), this without the usual supply management system. Politically we are at a stalemate with unpleasant elections coming soon. Some of our top guys have trouble believing we might be in trouble and choosing denial as the best remedy. We will soon be going into the Sept. to Oct. season that is always good for some awkward outcomes. Time to unload some of the banks!