$82.50 was as high as we expected this stock to go; this on account of the fact that a 5th wave cannot be longer than a 3d wave when that 3d wave itself is already shorter than wave 1. Briefly it got fractionally higher than that but only by the smallest of margins. Today it was not able to repeat that feat, so far at least. The RSI peaked a few months ago and the OBV, On Balance Volume has no more room left to go higher. This is a sell! Today Yellen will confidently pronounce the World to be flat ( the world of yield-curves, that is) and with that she will undo 500 hundred years of progress since Copernicus formulated a model of the Universe that did not have the Federal Reserve at it’s center. Ironically this same Copernicus fellow was one of the first to formulate a quantity theory of money (back in 1517!) which, with a little massaging and torture, became the basis of the Gresham’s adage that “Bad money drives out good money” as in the US$ and gold. This time the world may not buy the narrative any longer. At least we now know what a “considerable period of time” is.

If you predict, do it often!

The Royal started in 1856 but only took on its present name in 1901. It is from Halifax. In 2007 this bank was 106 years old and assuming it started at ground level had a stock valued roughly at $60 higher or about $0.57 per year. The low in 2009 we correctly pinpointed in advance (see old blogs) as $26. From there it has gained roughly $54 over 5 1/2 years which works out to $9.82 per year. This, of course, in the aftermath of the great recession which really wasn’t in Canada.

The count is not clear and differs for the 5 big banks in the country. So we just look for what normally would happen. The stock would trade within a , usually well, defined channel.  Here in blue. Having passed $70 or so we are above it. Then there is the possibility of a large wave 4 triangle, very compressed but a triangle nevertheless. None of the others have this. The triangle typically targets a level that can be found by connecting a previous top through the top of the b-leg. That works out to about $77 and we broke that. Measuring the “mouth” of the triangle gives about $35 and added to the low of e of $45 comes to about $80 or perhaps a little higher. Basically we are there! If we use the B-wave concept and , as always, look for equality we would find that at $81 give or take. There is only one line left, connecting the tops, in turquoise, that might point to a higher level around $92. But, looking at a detailed picture;

We see that wave 3 is smaller than wave 1, therefore in order that wave 3 does not become the shortest wave, wave 5 logically has to be shorter than 3. In this case that works out to less than $82.50. On top of that, the RSI which for this particular stock has had very good predictive powers, is at its most overbought for the past three years or more. This is a sell and I hope that call will be as correct as the $26 buy in 2009. Good luck.

Below is that blog of Jan. 22nd 2009 , still done by hand. Notice that that chart is pretty well the mirror of the Bigchart above albeit on a different scale;

It called for a rise to at least $38. Today I would change the count to an A-B-C instead of a 5-wave sequence. The C is a diagonal and normally is retraced entirely which would have given an initial target around $52. By the way $26 was a 50% correction of the entire value and a 61% correction of wave 3 from ‘89.

So how does the Royal Bank look by comparison to the Swiss index? It has moved up from $5 to $72 in about 24 years (not including a dividend of 3 to 5 % along the way!) for a total gain of $67. To make the no-slide-rule-math simple we will call that $64, which then conveniently equals 2x2x2x2x2x2 which means that the stock must have doubled every 4 years (24/6=4). Using the rule of 72 that equates to a return of 72/4=18% over the entire period, compounded.

During this entire period RY benefitted from the reverse take-over of the far better managed Dominion Securities (1987?), the entry into the insurance business and a substantial expansion of the wealth management business. Interestingly it is exactly that which caused the downfall of one or two of the Swiss competitors. From here on it will mostly be less, or less profitable,  mortgage business, Basel 3, the Volcker rule and someday, perhaps, a less ironclad oligopoly as Canada attempts to grow up with the rest of the world. All that is left is Janet Yellen.

We just cannot see this continuing much longer. By clicking on the charts you can enlarge them and move them around to make the comparison with the Swiss index more expressive.

It did not stop precisely at the trend-line, but then a slight throw-over is pretty normal. So here we are, 5 waves up in C of the larger A-B-C that is, at least as far as we can tell , an unmistakeable B-wave. That B-wave is then most likely the B in a very large 7 to 10 year irregular flat. The C is supposed to drop below the low point of the A, which is at about $26. I am quite sure that there is not a single reader of this blog that will put any credence into this prediction  but that just happens to be the beauty of it all.