Year: 2016

RY again

Hamilton

ry nov 12 2016

RY has gone right to the extreme of , almost, $86. That is an increase of about 330% since the lows immediately after the Great Recession. Much of this is due to multiple expansion, which itself is due to the low interest rates and the corresponding discounted value.  No doubt the increase in real estate values, non inflationary of course, had much to do with it as well. Unless you believe that this will continue, we do not, then you should not continue to own this stock from a trading perspective. The RSI has always been a good indicator and again it has gone into overbought territory twice.

Interest Rates–TLT

Hamilton

The then,June 14 and now charts as usual;

tlt july 14 2016TLT nov 12 2016

The TLT represents 20 year government bonds. The move in the last four months is from 144 to 122, or 22 full points. That is the same as a move from 1.69% to 2.58%,or roughly a full percent. With this long a duration that is a lot of money if you are on the wrong side!

More importantly, these wedges or diagonal triangles in EW jargon normally retrace completely back to the base which would be around 90, or perhaps even 80 if the wedge is bigger than we expected. The RSI suggests a bounce here – back to the trendline? – and then we have  another 30 to 40 points to go.

A great ETF, TBT, also done by Barclays, is the 2X inverse Us Gov. Bond >25 years ETF. Here is a picture for the past year;

TBT nov 11 2016

There are quite a few others, both leveraged or not and with a whole range of durations.  To me it is not clear that this move has much to do with the elections. But, on the other hand, I am not sympathetic to a number of Trump’s policies but there is one that I would wholeheartedly agree with and that is get rid of Yellen.

NWC, North West Co. update

Hamilton

Once again the usual then, 24th March 2016, and now charts;

NWC oct 25 2016

From the peak this stock had lost about 21% and is presently rebounding in, what we think is wave 4 of 3. Whatever, the target for this round is at about $20 so we are not done yet by any means! Actually the drop so far has occurred at a much slower pace than one might have expected given the wedge-like structure over the two years or so going into this drop.       Perhaps Canadians are encouraged by our CB Governor Poloz’s latest comments about another 18 months of the same, that is wait and see what happens. We thought that was the policy all along.

OGC, OceanaGold

Hamilton

Back in March, when this stock was at $4, the question was asked where it would go. My best guess, at the time, was $5.50. Here is why;

ogc oct 22 2016

This stock only came into existence in 2007, so there was not much of a history or, for that matter, much of an EW pattern to work with. Fortunately sometimes all you need is one minor pattern to be able to anticipate the very next move even though everything beyond that remains inscrutable. In this case there is a triangle, or perhaps even two, as shown in pink (the larger one) and blue the smaller one). Both measure $3.75 at the mouth and as the low of the e wave is the same for both, they both suggest a high of $5.50. Furthermore, if this is indeed a triangle it would have to be a B-wave and not a 4th wave given the proportions. In other words one could reasonable expect a large A-B-C structure as shown in green. This is corrective and calls for a drop back to $1.75 or lower. More often than not the C legs tend towards simple or vector equality, again suggesting $5.50 for a top.

As far as timing is concerned, the extreme is frequently reached more or less perpendicularly above the apex.  This would be dead on for the blue triangle but not for the pink one which could allow for a peak much later. So where do we go from here?

ogc oct 22 2016 s

The “thrust” can easily be counted as a 5 wave move so that part is OK. The almost 40% drop from the extreme is now beginning to look very much like a correction, an a-b-c again but on a much smaller scale. That could mean that the high is not yet in and is still to come, albeit perhaps close to the $5.50 level but a little above it. Only after that will the stock drop back to $1.75 or lower.

Given the contradicting message from the longer and shorter term pictures, it might be advisable not to take additional positions as it is entirely possible, despite the very prescient call last May, that the whole idea of triangles is completely wrong and that we are presently only just starting wave 5 of 3 of 3 of a larger bull move which would have the potential to go much higher. I do not think so, but EW and thinking do not mix.