Then and now charts;
Nothing much has changed for almost two years. We remain bearish as for the last 13 years this stock has most probable been forming a B wave , shown in purple. Alternatively this could be counted as a 5th wave all though that is far less probable. Either way the outcome is ultimately the same, a drop to 200/50.
We caught the $50 low back in 2003, but otherwise it was mostly hit and miss. Not the sort of thing that you want from this blog. So here then is the perfectly correct prognosis of where FFH is going.
First of all, as always, we start with the big picture. Back in the nineties this stock came from nowhere and immediately rose to prominence. Wood Gundy was literally salivating at the mouth when it hit $600, expecting a few hundred more. Well, we got $150 more but it did take 18 years to do. That is a long time of explaining to do for the rookie investment advisors who bought into the hype. The stock quickly dropped to about $50, or down 92%. It climbs back fairly linearly and oddly the 2008 great recession barely registers as by now the world knows that the top dog at this company is a short seller, making some wonder if this is an insurance company or a hedge fund.
From an EW perspective we cannot determine precisely where we are. However, roughly in the middle there is this near perfect expanding triangle a-b-c-d-e. These gems are always either a B-wave, or a wave 4. In this particular case it matters little which scenario you prefer as the outcome is the same, at least to about $325. As we get closer we will provide more detail. For the moment we can get one more minor push up and then this stock should tank. We would not wait for that. As the saying goes, low tide strands all boats, even the best.
On a completely different note, even if you are not Dutch, this is worth watching/listening to;
The usual then, Sept. 2011 and now charts;
You can click on these charts to enlarge them and push them around for a better comparison. This stock is run by a pretty savvy fellow known for his bearish predilections and his willingness to act on them. That may , in part, explain why the stock is out of phase with the rest of the world and certainly most insurance companies. The range during the great recession from, say , $200 to $400 is but a fraction of the rollercoaster back when we had the tech bubble burst. Our call, in Sept. of 2011, for a drop in wave C down was obviously premature, in fact the stock managed to go essentially nowhere for another whole year and then some. With the benefit of hindsight and examples set by other stocks (see HON, and the US indices), one has to conclude that the diagonal, that is wedge, was incomplete and counted incorrectly. This is what all these QEs do , they drag out the inevitable much further than one would normally expect. The C was probable over at the start of this year, followed by a minor degree 1-2 etc.
Ultimately wedges should retrace to there base which in this case is $100.
Almost 3 years ago we got lucky with this stock by recommending a sell at $400 (about 61.8% retracement) and buying back at $275 a month later. We prefer to be smart but will take luck any time. Since then the stock has spent 2 to 3 years doing relatively little, the amber light was on and there was nothing more to say. Only once before has this stock spent so much time doing so little (‘03 to ‘06), so, like a volcano , it may come to life at any moment, most likely to the downside! It has been hugging the lower boundary line for almost a year now and has done what it should in terms of retracement. Time to get out or at the very least put in a stop at about $375.
This company is run buy very smart management (Mr. Watsa) , known for their willingness to contemplate the bear side which would normally work in their favour. But they are also an insurance company and as such are experiencing difficult times due to low returns on investments. According to statements made by Mr. Watsa they now fear a deflationary environment and are also concerned about a Fed. that has effectively made itself irrelevant due to no more ammo and, are very concerned about the Chinese real estate bubble. So the stock could actually go up but for the moment the risk seems to be to the downside.