Month: February 2016

SNC Lavalin Group and ABB, Asea Brown Boveri

Hamilton

snc feb 5 2016bsnc feb 5 2016

SNC has been confusing. At one point we had the B-wave top one notch to the left, where the wave 5 top is now. Then it seemed possible that a huge triangle  was forming. This has not yet been negated but a counter indicator has developed in the form of another triangle as shown on the right in detail.

If the count as shown is correct this triangle should be the 4th wave of C down, C has to be 5 waves in this count. Nevertheless it looks a lot more like a B-wave triangle. This is a possibility if from the high of early 2011 we are actually in a double zig-zag correction, that is an a-b-c X a-b-c. The only certainty that we have is that this is a triangle and it is near completing the last e leg, which cannot exceed $44. It measures about $13, or $21 if you take the 1.62 usual multiple. That gives the potential of a drop to $24/$21 depending on where e will end. This is pretty close to the 4th wave of previous degree, and would have the added advantage that both legs of the second zig-zag would be about equal.

In terms of trading – we want this blog to be, first and foremost, actionable – because most investors will not, or cannot, go short we suggest going long a put option. If it is out far enough it will not decay too much should the stock go above $44. At the very least sell it if you own it.

Asea Brown Boveri, ABB, the Swiss/Swedish engineering/construction (mainly electrical equipment) firm, has a similar chart. It is actually a little more colourful as they almost went bankrupt in 2002. Here it is;

abb feb 5 2016

The outlook is equally somber.

RDS.B and COP, Shell and Conoco

Hamilton

rds.b cop feb 4 2016

You will recall that we were not sure if Shell had made a 5th wave into the 2014 high or simple a B-wave. This would have some bearing on what would happen next. Looking at Conoco Phillips there is absolutely no doubt that it is a B-wave so we will adopt that. We are now in C which should become 5 waves down.

rds.b feb 2016cop feb 4 2016

Roughly the two stocks seem to have travelled the same path and our most recent call on RDS.B, that it was a buy – see previous blog – was spot on. Today’s events raise some questions. Shell saw its profits drop by 44% which was better than expected and better than a number of other integrated oils. Conoco, on the other hand lost 3.8 bln. and announced a cut in dividends. As a result Shell went up 5/6% and Cop went down a similar percentage.

Shell may have hit the absolute bottom at $35.95 and should then go up a lot. Looking at COP it seems to be in a small triangle and still needs a bit more down. Even if it does not, this would probable be a small degree b-wave triangle that is still a correction. To accommodate this one would have to be on the alert that perhaps for both stocks we are only in wave 4 with the third wave being extended. You are up about 25% on Shell and may wish to hold on to about $48 or so. There it might be good to step aside. We will try to keep an eye on it, the RSI has more to go.

In the meantime you can tell your neighbour that you made 25% in two weeks and are hoping for 33%. If he asks how you did this tell him by reading this blog. If he then asks if it is expensive tell him it is free, at least for now.

 

GPRO update

Hamilton

gpro feb 4 2016

See previous blog. We had $12 or so as an ideal low but did not necessarily expect it to get their. Of course it did. Now we have a near perfect A-B-C. I saw a dog walking in the woods the other day with one of these cameras mounted on its back. 2 hours of film if you put a big enough memory card in it. These things should not cost $400. At $100 everybody will own one so their is potential. In our opinion this is a buy here (unless it goes lower).

Joke , by Andrew Strauss.

Hamilton

“I may be surprised. But I don’t think I will be.” Andrew Strauss, Cricketer

A stranger walking in the countryside comes across a shepherd and a huge flock of sheep. He tells the shepherd that he will bet $100 against one of his sheep that he can tell the exact number in the flock. The shepherd thinks it over; “It’s a big flock”, he says to himself, so he takes the bet. "973", says the stranger. The shepherd is astonished, because that is exactly right. "OK, I’m a man of my word, take an animal". The stranger picks one up and begins to walk away.

"Wait", cries the shepherd. "Let me have a chance to get even. Double or nothing that I can guess your exact occupation". The stranger agrees. "You are an economist for a government think tank", says the shepherd. "Amazing!" responds the stranger. "You are exactly right. But tell me, how did you deduce that?" "Well", says the shepherd, "Put down my dog and I will tell you".

 

This was in the latest letter from the Absolute Return Partners.