Year: 2016

CF Industries, on NY …………….and CF, Canaccord Fin.

Hamilton

cf feb 13 2016 bcf feb 13 2016 s

For the record we did think the stock was peaking in 2012 at $225, or $45 on an after split basis. Do not confuse this stock with CF on the TSX, Canaccord Financial. The charts look equally miserable but it is in an entirely different business.

CF stock is trend persistent. A term usually reserved to describe the performance of a commodity. That is what CF does, it makes the commodity ammonia NH3 , the stuff that gives livestock farms that very distinct smell. They do that, I believe, by squeezing the N out of Natgas and converting it to a liquid or a solid. It is used almost exclusively as a fertilizer and consequently they are competitors of the potash miners.

Something went horrible wrong mid 2015. They decided the stock should be split 5 to 1 effective June 18,2015 not realizing that the market was about to do that for them. This creates a loss illusion for those that cannot read their statements, which is probable at least half of them. When the stock drops from $350 to $70 the trend persistency is broken and there is a feeling that the 5-fold increase in the number of shares does not fully compensate. If you think this is nonsense, go to England.  There used to be 12 pence to the shilling and then they went metric sometime around 1971. From that point there were only 10 p to the shilling and 10 shilling to the pound. A good part of the English population still believes this was a conspiracy by the then government to rob them of 20% of their wealth. That sentiment still persists.

The stock looks to be doing a standard a-b-c correction. It got to about $26 which is close to 61.8%. Add to that that the c is about equal to the a, and you have a good case for assuming that the drop is complete. Forbes and Credit Suisse, both well known for their insights in manure, have the stock as the TOP PICK! We would hold off just a little. There aren’t 5 waves in the c, there must be one more down wave, perhaps to $20. The yield then at over 4.5% would indeed make it an attractive dividend stock.

For the sake of completeness we add the chart of the other CF, both then, Dec. 2011, and now;

cf dec 2011cf on TSE feb 13 2016

As usual it took longer than expected, but we will get there, that is below $3. The wave count is now purely academic. The question is will it survive?

X, TMX Group

Hamilton

x feb 12 2016

This is the TMX Group, and yes we would have sold it earlier at $45 four years ago. But that was then and now is today. Briefly we were at least 40% below the peak, but typically when you have a big B-wave (see also FFH) the C should take the stock down as far as the A leg,$25 and most often to below the A’s low, $20. It should do so in a clean 5-wave sequence.

So how does one know that it is a B-wave in a large A_B_C flat? Symmetry. B-waves are 3-wave structures. If you can find perfect symmetry you can bet your bottom dollar that that is what it is. Here you have that. If you were to put a mirror where the blue line is, both sides would be perfect and opposite reflections of each other.

TMX is an exchange, they make money selling information, charging for trades and listings etc., the more business the more income. They did not make any in the last quarter. Not good so early in the game!

TSX and market timing.

Hamilton

TSX feb 12 2016xyz

They say you cannot time the market. “They” are your banker, investment advisor, mutual fund salesperson and so on and so forth. They passionately want you to believe that, simple because if you could, they would all become superfluous. Mostly they are but they don’t want to make it obvious.

If you think math is fun you can go for the standard deviation stuff, on some websites it is available and you can pick your preferred deviation. There are also Bollinger bands and other such stuff. The easiest way is to do it yourself.

Most charts go from the bottom left to the top right, simple because the y and x units are chosen in that way or the chart size adjusts to be filled (like fitting to the page when printing). The angle at which the line rises is a function of growth (population or wealth) and productivity. In the main it is fairly constant over large periods of time. In the TSX case the index doubles about every 15 years which corresponds to a growth rate of about 5% (rule of 72). If you want to complicate things you could use a semi-log scale. We have not here so if we wish to measure 25% above or below (the blue lines) we should get a fan. The fan expands as we use a larger deviation from the mean (in black), as for instance when using 30%.

If you do this for , say 20% you might get some thing like this;

TSX feb 12 2016 2

You would have made 6 trades (of course you can do portions rather than the whole), 3 sells and 3 buys (we do not use stops, which maybe you should!) On the first set of trades you break even, on the third trade you make 3X your money and on the 5th about 2X. Presently you are long at 9000, good for 1.3X if you were to close out. That adds up to 3x2x1.3=7.8x and since you start with 3000 you now have 23.400, that is double the present market value.

You can increase or decrease the sensitivity, that is widen or narrow the fan. A very wide fan would replicate a buy-and-hold approach, what the industry wants except when they want to earn something themselves. A very narrow fan would resemble the famous day trader.

CEF.A, Central Fund update

Hamilton

The usual, then Oct. 31 2014, and now charts;

cef.a oct 31 2014cef feb 11 2016

We just want to warn against getting carried away, regardless of what the bandwagon might be. The Central Fund warns us that the obvious may just not be that obvious. If we knew the answer we would tell you. Keep in mind that the ideal 4th wave of previous degree on gold is not at $1050 or so but more like $850 to $900! ($10 or so on this fund). We never got there which warns you that it may come yet. Above $19 this would be negated but by that time you are getting close to a 62% retracement.