Bayer

Bayer

Hamilton

Then (a year ago) and now.

Bayer dec 18 2011Bayer AG dec 28 2012

Sometimes things do not work out. This is one of those times. Rather than succumb to bear pressures this stock decided to go in the opposite direction. It is a good reminder that the EW approach, or the practitioner, is not entirely infallible. At least we got the A-B-C part correctly, so in the event that one had played this one aggressively short, the damage would still be minimal (as measured from first blog!); and that assumes that no stops were used.  Now that we are here one must assume that there is either a distorted flat A-B-C on its own, or a triangle, equally ugly. The measurement for the triangle would be around $105. However the trend line is right here and the Mnt. Everest target is at an even $100. Our inclination is to get out or go short again even if demand for aspirins is about to explode.

Bayer, Aspirins etc.

Hamilton

 

bayer oldbayer new

On the left the prognosis from June 17th 2011 and on the right where we are today. The stock dropped some $40 after completing the B-wave. One would be forgiven for believing that this stock might be counter-cyclical as, presumable, the consumption of aspirin is inversely related to the stock markets. Not so. We are most probable in wave 4 of C and should drop at least to $30 or so, which also happens to be the top of wave 1 up in the (extended) 5th wave to the top.

Another look at Germany, Bayer and EWG

Hamilton

Bayer june 2011 EWG june 2011

On the left we have Bayer. English people cannot pronounce that and consequently they call it “bear”. As it happens the chart is very bearish. This company is the inventor and manufacturer of the aspirin among many other pharmaceutical and chemical products. In many ways it is comparable in importance for the German economy to GE for that of the US.

On the right we have EWG which is the German ETF. Both top out at around the same time with Bayer once again underlining the importance of big numbers like $100. After the top Bayer crashes in an A-B-C whereas the ETF follows a very nice 5-wave pattern. (the former suggests a “flat” is in the making and the latter is indicative of a “zig-zag”, the difference is immaterial for the moment).

Both charts are stylized, and if the outcome is as expected, the trapeze shown tells us where things might go. As always, time will tell but one thing is certain, stocking up on aspirins is not going to help.

Just for the sake of completeness, we add the Dutch i-shares EWN. Not that the Dutch economy is that important in and of itself, but, as it happens, it is probable the most open economy and its index contains a disproportionate number of large multinationals (Phillips, Unilever, Shell etc.) and it has its finger on Europe’s pulse – oil or the Rhine. It should therefore reflect the effects of a globalized economy best. Here is the chart;

ewn june 2011

The story is the same, if anything more bearish , as this one wasn’t even able to retrace more than the Fibo 61.8% . Here too it is unclear if the first leg down is 5 waves or an a-b-c. 5-waves fits better given the anemic counter- trend.