Then, Jan 11, 2016, a buy. Today, maybe a sell. See previous two blogs. You could have been up almost 60% in five weeks. We simple do not know if it will go higher immediately or if there still is a 5th wave to come. Play it safe, as the saying goes, nobody has ever lost money by making money.
A former Deutsche Bank AG analyst once ranked among the best in the U.S. will pay a $100,000 penalty and be banned from the securities industry for a year to settle a regulator’s claims that he issued a buy recommendation at odds with his personal opinion.
XYZ recommended buying shares of discount retailer Big Lots Inc. in a March 29, 2012, report while telling colleagues internally that he didn’t downgrade the company because he wanted to maintain his relationship with its management, the Securities and Exchange Commission said in a statement Wednesday. XYZ agreed to resolve the SEC’s allegations without admitting or denying wrongdoing.
“When research analysts tell clients to buy or sell a particular security, the rules require them to actually mean what they say,” Andrew J. Ceresney, head of the SEC’s enforcement division, said in the statement. “Analysts simply cannot express one view publicly and the opposite view privately.”
XYZ, who was named the top-ranked department store analyst in 2012 by business-to-business publisher Institutional Investor, became concerned over cautious comments Big Lots executives made the day before his report came out, according to the SEC. Despite those concerns, the agency said, he maintained his “buy” rating and told colleagues on an internal call that “we just had them in town, so it’s not kosher to downgrade on the heels of something like that.”
Campbell soup doesn’t just make soup, they are in dozens of other food lines as well. The recipe for their chicken soup is no doubt top secret but we suspect that you start with a swimming pool full of water, add a truckload of salt, and fly a chicken over it. Tweak that with a dash of pepper and vwala you have 10000 servings. But that is not why you should sell this stock, even if, after 28 years you are still under water by 65 cents. Here is why you should:
1. It has a P/E north of 29, about twice the average. This is not a growth stock (see 10).
2. It is about to double top, always potentially a critical point in a stock’s life.
3. There is a plausible wave count that suggest everything after 2003 is a B-wave, C is next.
4. The stock is in the vertical stage, always a non-sustainable or terminal stage.
5. The stock is trading above it’s channel of 35 + years, see what happened last time.
6. Because the stock outperformed the S&P by 38% last year.
7. Because we are at a critical Fibonacci number in the stock’s price.
8. Net income declined by>20% yoy, and was just 62 (Fibo.) cents per share last quarter.
9. The 2.05% yield is less than the 2.20% on a risk-free treasury bond of 20 years.
10. The company is starting a venture capital business to find “growth”!
11. Analysts downgraded the stock on Jan.16 2016 from buy to hold. Are they right this time?
Recently I was asked when you should use a semi-log scale chart or an arithmetic one. There is no simple answer but EW is very much about good looks, that is beauty is in the eye of the beholder. Here we have Cigna, a healthcare/ insurance company that we looked at many years ago. We identified, correctly, the correction in 2001/2 and called for the stock to rise substantially to $37 from $15. The $175 level was not on the radar.
Revisiting this stock today, it is hard to make sense of the meteoric rise over the past 6 years, about 30x. Is this Obama care? Low interest rates? Or just a fluke? This is when a semi-log scale is appropriate (on the right) as it compresses the chart and gives you a better sense of proportionality. All of a sudden we get a nice channel and a plausible wave count. The stock clearly has peaked or is peaking.
The other side of the channel is at about $55, and the 4th wave of previous degree at $6 to $15 depending how you count. Either way this must be a sell.