MFC

MFC again

Hamilton

Earlier this month I wondered if Manulife might not actually be a buy. It has since gone about a dollar deeper but has come back almost all the way. To be bullish on MFC could be suicidal considering the company’s vulnerability to the stock market through many of its variable annuities, that effectively guarantee a return of your money at , at least, par at age 65 or after 10 years. This is one of those things that could not possible happen in a million years but actually did within a very short period of time after launching the Income Plus product, which was a great success at the time.

The other side of the coin is that when applying EW one should try not to think and keep an open mind. Most brokers are pretty good at the first but fail miserable at the second. It is very hard not to let prejudice enter into the equation but , in this case I will try not to let preconceived ideas influence the outcome.

Here are the charts again;

MFC july 22 20102 MFCJuly 22.2010

On the left is the shorter term chart and on the right the longer term. There are those that believe the correction from the lows may continue longer than we (I) think postponing the second down-leg to about June/July of 2011. It will still happen but just a little later in that scenario. Looking at MFC (and also POW, Power corp. and SLF, Sunlife) that may in fact be what is in store at least for this stock. Manulife is no slouch internationally and is one of the very few Canadian companies to have ventured abroad successfully. Particularly in the emerging markets of China and Indonesia. Insurance companies have also been more intensely regulated than banks and so far nothing has come out of the woodwork to suggest an imminent catastrophe. Its front lawn on Bloor street remains , as always, a dream to behold, not a single blade of grass is out of line.  Perhaps we should give this one the benefit of the doubt, albeit with a fairly tight stop!

MFC, Manulife

Hamilton

These fellows had read that their were no 10-year periods this century that the markets were actually down (or something like that) so they did what they normally do and that is write insurance only to very quickly find out that death is a highly predictable thing but stock markets are not. This made the company a natural bear product as in when the stock market goes down, they go down even faster courtesy of the relatively large amount of insured variable annuities they took on through their very popular Income Plus product. Not surprisingly (see previous blogs) the stock dropped from $42 to just under $10, or 76% in a relatively short period of time. Since then it regained about 1/2 of that drop to around $26 only to lose about 60% of that gain, despite the fact that the market overall did nothing comparable! So what could be next? Here is the chart;

mfc june 2010

The initial drop from $42 to $9+ is not a single 5-wave move (in the chart only the C-wave is shown) but more likely an A-B-C. Ergo it is possible that the entire correction is over and that we are now in the next bull leg, having completed a first wave up and the correction of that wave. Even in the event that that is incorrect , we could still be in a much larger counter-trend that still requires a C wave up (in pink). It is difficult to count the action since last August as anything but corrective, nor is it at all clear why the stock is down 60% (since August last) whereas the market overall is is down less than 5% today and up about 10% since August. Perhaps the stock is telling us that the second leg down in the stock market is still a ways in the future. A quick look at POW (Power Corp) a different but similar type of company lends credibility to this possibility.

POW june 2010 

Note that this stock has more or less followed the same pattern as Goldman Sachs (GS), Morgan Stanley and a few others.

SLF and MFC April 17 Update from March 30

Hamilton

On March the 30th (you can pull it up by putting the ticker symbol into the search box at the top) I suggested that both stocks were at worst in an a-b-c up pattern of which the a and part of b were complete . For SLF I suggested $19 and as a result you would not own it as the stock made the b low that day. However on MFC I suggested you buy it at the next pull-back as otherwise you would miss a $5-$10 potential gain. The next pull-back would have been a day later at roughly $14.

MFC April 17

It did about $7 up or roughly 50%, again we will call it 30% . SLF did essentially as expected but we simple missed the proverbial boat, but not the first time!

SLF April 17

By the way, if this is all we get it is pretty bearish for both stocks as this a-b-c pattern is corrective!

SLF and MFC March 30

Hamilton

I am assuming, as I did before (see SLF),  that 5 down was complete and now at the very least we should have a correction back to the top of the triangle, normally in an a-b-c structure. The a was complete with the big move up and now for the last day or two we have been working on the b. As indicated, on SLF at about $19 or so, it should be bought for the c part. Here are the charts.

SLFMarch 30

 

MFC MARCH30

It is hard to tell if we are down deep enough, it is simple a matter of weighing the chances of missing the boat against the potential of $5-$10 up. On the next down day I would buy.