SI

SI, Siemens and the DAX

Hamilton

si june 2012dax june 2012

We have steadfastly maintained that Siemens would , at the very least, trade down to $81 on the ADRs. It has. This level corresponds with the lows of the B in the larger B wave (actually more like $79). We do not expect it to stop here – after all the large B wave suggests a new low sometime in the future – but the count is presently not entirely clear and actually differs slightly from the DAX itself. Both charts are roughly equal, on both we are, very roughly , in the middle of the last 5-year range, but whereas the DAX sports a rather distinct wave 2 from last year’s Oct. lows, Siemens does not. Both are still pointing down.

SI, Siemens

Hamilton

Siemens was predicted to go to about $81. It is getting there but it has taken a long time. The outlook remains quite bearish (see previous blogs), but rather than regurgitate the EW analysis it occurred to me that it might be refreshing to use the Head & Shoulder pattern, something I know very little about. Here is the chart;

si may 2012

The left shoulder and the right shoulder sort of fit into a band that should run close to horizontally. Then, after the break-out under the lower channel line, the stock should fall by an amount similar to the distance that the head exceeds the upper trend line. It is as simple as that. Target $60. The EW target, by the way, is half of that.

MS Morgan Stanley, SI Siemens and the TSX

Hamilton

MS according to the charts could be forming a triangle. Here is an update;

ms dec 22 2011

We are following this with a little more interest than usual, having missed the opportunity to buy at $12. At the risk of boring the reader, I have done a little math just to test the validity of this being a triangle. Wave c relates to a by a factor of 0.652 and d to b by a factor of 0.748. Not ideal but close enough not to reject the notion of a triangle. Wave e now may not exceed c at $17.50, but also does not have to be contained by the triangle’s boundaries. The ideal level for e would be at $16.89. All this is mostly academic as you should not trade on it. But if it does all this, and it is a big if, then it will be a screaming buy at just under $10 where it would hit the upper channel line as support. $10 is also what was paid for Bear Sterns by JP Morgan. It is unthinkable that it would not pay that sum again for it’s own, far more distinguished, offspring now that it has been orphaned by it’s other parent, Glass-Steagall.

There are many other stocks that have a triangle forming, at least the possibility for one, Siemens (SI) and the TSX are possible examples;

si dec 22 2011tsx dec 22 2011

Both are presently in their respective e-waves, and whether or not they are actually forming triangles is perhaps less important than the fact that they have been going sideways for 5 months. Consolidation patterns are invariable resolved in the same direction in which you entered them, in this case down.

DAX, EWG and Siemens

Hamilton

Dax oct17 2011 ewg oct17 2011

si oct17 2011

The question is are we in wave 4 of 1, with 5 still to go to complete wave 1 (in black), or did we in fact already complete the entire wave 1 and are now in wave 2 (in blue)? Certainly the black interpretation is the more elegant one, but fortunately it does not matter all that much at this point as wave 3 was the lion’s share of the drop anyway so the proportion of either wave 4 of 1 or wave 2 are not that different. We have already retraced about 40% and are at a wave 4 level, a move to about 62% would not be negligible but certainly not tradeable for most of us. That is why we recommended getting out of longs the other day.

This market is like a casino and roulette is played without the numbers, just black and red and as a result it is a binary proposition, that cannot be controlled too well . This risk-on , risk-off  approach does not leave much for error. You should stay short for the next few months as this market has a long way to go. In terms getting short again , or more so, the 62% retracement level is as good a spot as any, but we may not even get there.