CM

RY April 14, continued from March 12

Hamilton

Here is March 12.

RY March 12

As stated then we did not know if we would get 5 or 3 waves up, therefore at $35-$36 it was time to get out (rather many sure deals than a few bad ones). Now we know, it is 5-waves up which means that after an intermission ( b or 2) we should get another 5-waves to complete the move. This is what it might look like.

RY April 14

As it did follow the 5-wave track rather precisely I would now expect a pull back of about 61% to about $33 once it has reached about $42 /$44 or so. This is micro-managing the stocks future  and should be taken with a good doses of caution and lots of salt. Ultimately the stock could trade back up to $44/$48 which at the moment seems crazy but we should remember that most of  the negative stuff applicable to the US does not apply here. This is an oligopolistic backwater where banks are far less entrepreneurial,we do not have liar loans, mortgages without recourse and or the same degree of securitization. What we do have is the license to gouge provided by our central bank’s interest rate policy. Most other banks do not look as positive, in fact NA looks more like a 3-wave correction. It might also be a good trade to buy, say the Bank of Commerce and sell the Royal. Below is 2 –year chart.

RY CM pil 14

Sell 1.2 shares of RY @ $41 for each share of CM  bought @ $51 and then wait.

BMO CM Feb 19

Hamilton

BMO feb 19

CM feb 19

Speaking of banks, BMO has about the best ratio between high and present price, Commerce is not far behind both at about 33/34% . RY is at 50% so on that metric less attractive if you assume all will some day again trade at the same price, which is true today with 3 of them at about $26.  I think we are at a point where missing the boat is a greater risk than not getting on board. All of these have the potential to rise $20 or so in the next few months so a little nibling is probably a good idea. GE is also a bank!

CM and TSE jan 23

Hamilton

This is an art not a science so there is an element of judgement which can only be partially eliminated by doing it often.  As far as the TSE is concerned I will go with the triangle, typically you then hit a bottom right under he apex and 5 tends to equal 1 so roughly around 7000. The S&P works better without the triangle, just an a-b-c 4th wave, otherwise the conclusions stay about the same.

Looking again at the Canadian banks I have added Commerce to see how it compares to the Royal. The chart is , as usual, open to different interpretations but given a very clear triangle and a fairly clear 3d wave I assume that ether the bottom has been hit already (and we are in a b-wave) or we are one leg short and could still drop to say $38 (this can happen in either scenario). In any case we have done slightly more than 61.8% from the $105 high and given that the next major move is probable a (counter-trend???) rally of perhaps $15 plus the risk/reward equation supports the idea that around here to a few dollars lower might well be a good buy. Here are the charts.

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Click to Enlarge