Year: 2016

FM, First Quantum Minerals Ltd. update

Hamilton

fm jan 11 2016fm jan 11 2016 s

There are many rules and guidelines in EW that I do not fully comprehend. The last few years we have had an inexplicable two to three years time delay, as if everything was frozen, in old kinds of stocks. No doubt it is caused in no small degree by the Fed. intervention in the market. EW is based on the premise of free markets with a large number of players. One could argue that that premise does not hold when the Fed. (or the ECB or the PBOC etc.etc.) simple writes another cheque for X bln. when things do not work out as they want them to.

     In the case of FM a very clear and well proportioned B-wave developed immediately after the lows of the great recession, peaking in 2011. From there a 5-wave down sequence should have started for wave C. It did not, it was delayed and when at last the down-leg did materialize it looks a lot more like a zig-zag A-B-C than a 5 wave C. We have precisely the same situation with RDS.B and Oil itself (see recent blog) and a few other stocks. Perhaps the B-wave, which MUST be followed by a 5-wave C, did not exist after all and the orthodox top actually occurred in 2014 instead.

    In any event the targets are not materially different. We should make a new low, that is below $2.60 Of course it can always go a little further but it is impossible to slice and dice this any further. A buy below $2.60!

For the record, we first predicted this trajectory back in March 2011, without of course the extra 2/3 years, as per below;

fm march 18 2011

You would have saved yourself $116 or so!

Oil and RDS.B

Hamilton

The usual then, August 8, 2015, and now charts;

OIL aug 6 2015oil jan 10 2016 b

 

Since August oil has dropped from, roughly, $45 to $33 or about another $12. As you can see, now the A and C legs are vector equal as today’s low is on the circle that we had drawn back then. Despite that we are not at all certain that this is the bottom as there still appears to be a wave down missing. Theoretically we could solve that problem by assuming that there was a triangle B wave to begin with. It looks absolutely awful so we do not give it much weight, but still it remains a possibility that we will still get the missing waves 4 and 5 and therefore it could drop even lower to $11,23. But that is something we would not bet on at this stage.

We can show the missing waves 4 and 5 perhaps more clearly using futures;

crude oil fut jan 10 2016

So all though we have the requisite 9 waves to make a full sequence for wave C down, the count looks weird, particularly the second wave 2 which takes two full years to unfold. It might be possible that we will still get a very elongated wave 4 followed by a slightly lower low years from now.

Royal Dutch tells us the same story. We are as low as we need to go, but could still go a little lower;

rds.b jan 10 2016 brds.b jan 10 2016 s

Again we are not sure which top is THE top but our preference is the first as this fits better with the rest of the world. In that event the recent wave C down should unfold in 5 waves. It is possible that we have that but a further drop to about $34 would be reasonable should de stock want to retrace 61%. With a yield of 9.5%, which no doubt will be reduced, this stock is now definitely in the buy, not sell category.

ABX update

Hamilton

The usual then, August 4, 2015, and now charts;

abx aug 4 2015abx jan 10 2016

Back in August we had an $8 target for this stock, based on the diagonal triangle or wedge that appeared to be the operational pattern. The stock actually traded marginally below that level twice before starting it’s trek north. At the recent highs of $12+ you are up 50%, not a bad result.

Things might get a lot better as the minimum target for this kind of a pattern is at the starting point, that is $23 or so. If it breaks the upper downward sloping line sentiment could become a lot more positive as that would be the midpoint, roughly, of an initial 5-wave move up. Hold on.