PD, Precision Drilling, and TDG, Trinidad Drilling

February 7, 2016February 7, 2016 Hamilton

We have had this count now for at least three years. This is a fascinating company. As the name implies they are precision drillers and not a bunch of wildcatters that poke holes in the earth. They are the largest and operate in Canada and the US but also elsewhere in the world under the name of Grey Wolf International.

The EW pattern seems to be relatively clear. Going into 2009 we have a beautiful A-B-C correction that is almost certainly complete. After that a first wave up which is then retraced by an a-b-c down retracing, as is often the case, almost the entire first wave. Now we should be ready to launch wave 3 up of a new bull.

In the US there are roughly 500 rigs operating out of 1600 at the peak. In Calgary older rigs fetch little more than their scrap value. But shale wells do not last very long, so either production will decline causing prices to increase, or new wells will have to be drilled. These guys work on contract which is much better than doing it yourself with all the capex. They are very leveraged to oil. If you want to add some convexity to your portfolio this stock with a beta of 2.77 will get you started.

If you prefer to fish closer to the bottom there is also TDG, Trinidad Drilling. It has a different count but the similarities are nevertheless pretty obvious;

Their HQ is in Calgary, not Trinidad. See also an earlier blog. Do not confuse this stock with TDG on NY!

OTC, Open Text update

February 7, 2016 Hamilton

On the left, we called for a top just about a year ago at $78, give or take. It immediately plunged about $30 or almost 40%. Then we looked for a rebound to about $65, it went a little higher (see all blogs). Here we are having completed either waves 1 and 2 or A and B. Next is 3 etc. or C. The 4th wave of previous degree is around $25. You just cannot take the chance! Here is the rebound illustrated to save you time, this was as of Sept 2015.

AAPL again

February 7, 2016February 7, 2016 Hamilton

Then , a year ago, and now charts as usual;

A year ago we predicted the stock was about to, or had already, peaked at about $128/9. It did go fractionally higher after that, three times in fact, but it would have been an excellent exit point saving you about 28% of your money. (When you talk to your neighbour etc. etc….. you know the routine).

Our first target was $92. It has briefly traded at $91.80, overlapping the top of wave 3. So now the question is where from here. Down. Down to about $70, at least. One technique that is easier to implement than than the rounding top which requires a circle, is to simple assume that things go down at the same rate they went up. That is easy to construct as per the chart on the right, $70 by Aug./Sept. The reason is simple as well. We are going into the year of the monkey and China is now Apple’s largest customer. Monkey see, monkey do! There will be tons of similar products competing with AAPL. They will therefore have to stay at the forefront of innovation which is getting increasingly harder to do, particularly in a market that is starting to get a little saturated, so “growth” will suffer. In the meantime margins will be compressed. The stock is excessively over-owned, particularly by large funds, hedge funds and the like.

Then there is that 200 bln. pile of cash sitting out there somewhere. It is a lot less and if you look at their balance sheet borrowings and deferred taxes they are almost as large, so this does not mean a lot other than that they are doing all they can to defer repatriation of profits.

FCX update

February 7, 2016 Hamilton

The usual then, Jan 11, 2016 and now charts;

We were a few days early and a dollar too high, but had you bought it around $4.50 you would still be up almost 25%. We are not at all sure that this is the final bottom but looking at the chart a little closer, it is possible to count the waves in such a way that we were only at the end of wave 3 of this wave and still have 4 and 5 to go (shown in blue). Again we are not sure but it is a possibility.

Furthermore, as first waves in a new bull market tend to be retraced almost entirely there should not be much lost if you step aside at, say $7 or so, and wait it out.

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