Month: February 2016

ECA, update

Hamilton

Then , June 2013 and July 2015, and now charts as usual;

eca feb 16 2013eca july 24 2015

and now, that is today;

eca feb 21 2016

Different chart suppliers use different ways of coping with stock splits and other wonderful things. As you can see the Bigcharts have a peak at around $53 or so, whereas the G&M chart peaks closer to $96. There is no right or wrong way of doing this but, when Cenovus , CVE, was split out of ECA at the end of 2009 obviously the ECA stock drops by the value of CVE plus or minus the beneficial immediate impact of the split, here that is roughly from $66 to $29. If this is not worked backwards and forwards into the chart it becomes quite meaningless. Some may not notice!

In any event (see the text in the blogs) the target was originally as low as $5. Then there was the possibility that the drop might stop at a little above $6. Today we will stop EWaving and switch to the Head and Shoulder method, as I understand it. That tells me we are at the exact low.

If the wedge is correct than we could get a violent reversal and, by the way, the 5th leg in this wedge does not have to, and most often does not, go all the way to the trend line.

LLY, Eli Lilly & Co.

Hamilton

lly feb 21 2016 blly feb 21 2016

Eli Lilly is, of course, in the business of making pharmaceuticals. Among many other things it makes Cialis, which, if you haven’t gathered that yet from the constant stream of commercials on your TV, is intended to help get the investors’ hopes up.

Elliot Wave, like pharmacy, is easy to understand. The cycle is five up, three down, repeated ad infinitum. There are a number of things that we have five of (fingers, toes) but nothing comes in threes, so five is good, three is bad. That is it. Given this simplicity, it is little wonder that every Tom, Dick and Harry openly use EW or are “closet” practitioners. The Bank Credit Analyst loves the stuff, Credit Suisse, Barclays and virtually every financial institution, including even RBC, use it somewhere in their research, albeit for the most part incorrectly.

Lilly is a good example. There are a lot of ambiguities. Looking at the larger chart the stock seems to have behaved in line with most other stocks except that it peaks with technology in 2000 rather than in 2007 or so. Otherwise the count , in blue , is straightforward. Presently we should be under the peak of a big B-wave and on our way down in C – like the rest of the universe except for pharmaceuticals. However, looking at the short-term chart, we get (potentially) a decidedly different picture. This thing looks like a simple a-b-c, three wave correction! There are a number of excuses that can be brought forward to explain this contradiction but none are very elegant. So we will wait for the future to become the past and then we will predict what happened. Stay tuned. Just to be clear, we are leaning to the sell side!

For comparison we show MRK (see recent blog) again. Because size matters to some, we have tried to calibrate the two charts so they can be put side by side;

mrk feb 13 2016

also, for completeness, we show Pfizer;

pfe feb 21 2016

With PFE it is plausible, at least there are two different counts, to assume that the 2009 low completes an entire correction as the stock is down 75+%. With MRK that is not that obvious as the stock has not even reached the 4th wave of previous degree.

UTX update.

Hamilton

The usual then, July 21,2015, and now charts;

UTX july 2015utx feb 20 2016 b

Today’s chart covers a longer period of time which creates a wider channel but otherwise the analysis is the same. Notice that the longer timeframe has two triangles in it. As stated ad nauseam in this blog, triangles occur only either as 4th waves or as B-waves. The first is a fourth wave and the higher one a b-wave within a B-wave. We assume that because of the symmetry and the fact that it is not substantial larger than 130% of the A wave. We are down about another $25 or a similar percentage from the July 21 date. From the peak the stock is down about 37% More importantly it is now below the channel. This C leg should unfold in a 5-wave sequence. Soon the first wave of that sequence should be complete as shown in this detailed chart;

utx feb 20 2016

The bounce up in wave 2 of C often hits the channel from the underside at about $92 or thereabouts. Then the real fun starts in wave 3.

WFT, West Fraser Timber update

Hamilton

The usual then, a year ago Feb. 3, 2015, and now charts;

wft feb 3 2015wft feb 20 2016

We were expecting at least a $30 drop, roughly from $75 to $45, the 4th wave of previous degree. We are at about $40 now and this is a good point to step aside. We expect a normal a-b-c correction and  so far we have only completed the a leg. The b should start right here at about $39 and could retrace 40% or more of the drop, so it could easily go to about $54. Then the c leg should start with a target of $30 or lower.

For the record, we have not always been correct on this stock, but we remind the reader that they should not let losses run. If you cut your losses at 10% say, you can be wrong 4.5X to account for this 45% gain. If you do better than 4.5X wrong against 1X right you still win! This is all the more so if we are talking about opportunities missed as opposed to actual losses.