Canadian Banks.

So now that we have a prototype how does this fit with the Canadian Banks? First a bit more about B-waves. They can be regular, or irregular which simple means that they climb above the starting point of the A wave. Their are no hard and fast rules but I believe it is more or less accepted that irregular B-waves should not exceed the top of the A-wave by more than about 30 t0 35%. Here is an example, CWB, Canadian Western Bank, they pride themselves on financing anything that is yellow (think CAT) and belches diesel smoke;

cwb june 29 2015

You can clearly see the B-wave. This one just happens to be at the edge of the 30 to 35% or so limit, but in every other respect it is perfectly clear. Target $8 or lower. If that sounds ridiculous than keep in mind that it last traded there just 10 years ago.

An error crept into the chart, the 4th of previous degree line should be lower, at $6!

The next two big banks that have the clearest B-waves are CIBC, CM and BMO;

CM june 29 2015bmo june 29 2015

Commerce is of particular interest as it managed to double top, the last big bank to do so much to the surprise of many that work there and thought they would never see the day. In any event, nice B-waves and terrible targets. BNS and National Bank have B-waves that are borderline but still acceptable given the channels they are in;

bns june 29 2015Na june 29 2015

Royal appears to follow the triangle scenario a little better and TD is unclear, perhaps because the Canada Trust part changed the company to such an extent that it simple cannot be looked at on a continues basis;

ry june 29 2015td june 29 2015

Royal sticks to it’s channel quite nicely. It would fit either of the two scenarios equally well, in fact it probably fallows the path of JP Morgan the best despite the fact that it has outperformed it by a long shot. TD must fall into the B-wave scenario given the otherwise not acceptable overlap. Putting it all together, including the insurance companies we have the XFN, the TSX capped financial ETF;

XFN june 29 2015

There can be no question that this is a B-wave, AND that it is complete. This chart has less time on it as the ETF did not exist prior to 2002. Fortunately, we can still see where the wave 4 of previous degree, that is on the way up, is. $11 and that is where we should go under EW rules and guidelines.

We have left out HCG, Home Capital Group. It is by far the best performer and fundamentally runs a sound business model. It does not fit easily in either scenario but with a little imagination we can make the triangle – distorted though it may seem to be – work quite well. The top is even perfectly above the apex! Here is that chart;

HCG june 29 2015

The conclusion must be that you do not want to be in the financials, period. By the way, this negative outlook is in no way predicated on what happens in Greece. If the timing seems to coincide it would be just another one of those fallacies, after this, therefore because of this.

CM, Commerce Bank

cm dec 5 2014 gcm dec 5 2014 b

Two takes on the CIBC, the Google chart distorted to fit and the Bigchart. Both sport a clear B-wave, with or without a triangle in the middle. The perfect symmetry is obvious in both cases. We also have the double-topping phenomenon  that does not mean too much as on the way up there will always be a double topping moment. However, if it occurs concurrently with other things it is good to assume the worst. B-waves are followed by C waves and that is no fun.

CM, Commerce bank

cm aug 28 2014 bcm aug 28 2014 s

Same chart, just different timeframes/sizes. CIBC is the 5th largest of the big 5 in Canada. It is, arguable, best known for the “Commerce Building” in Toronto which is a very impressive structure that has been the tallest in the British Empire for decades and was completed in 1930. Other than that they have numerous buildings all over Ontario that look a little like classical Roman pillboxes that exude safety and permanence and very little imagination. They have managed to stay alive over the years and today they are the only Canadian bank that has not regained the entire loss in value of their stock due to the Great Recession. That may yet happen!

The stock has a fairly clear EW count. Alternatives exist, as always, but the path of least resistance suggest that THE top occurred in 2008, in synch with the entire world, and that from that point we had an A down followed by a B up. That this is a B and not a 5-wave sequence is, at this point in time at least, pretty obvious. The A can be counted either as a 5-wave affaire or an a-b-c wave A. The latter interpretation fits best with what is starting to look a lot like a very large flat. If it is, and we believe that it is, the next major move will be C down. It is still possible that the stock would try to double top by going a little higher but we would not suggest sticking around to find out. A sell.

We have been wrong on this stock before but a look at a previous blog can still be instructive to see what an alternative count might look like.

CM , Can. Imperial Bank of Commerce update

cm dec 20 2012

Here is another longer term look at the “Commerce”. The count is not entirely clear but certainly the tangent changes after each set of parallel lines or channels. The green channel going over the entire chart is the level to which the stock might drop if it regressed back to the mean. Wave 3 is steeper than 1 and 5 is steeper than 3. The take-off point, say 1995, coincides roughly with the Greenspan cheap money world. At the bottom there are just a few random events that called for some form of intervention. The least know is the one in 1988 when Wood Gundy was essentially bankrupt having bitten off a bit too big a chunk of British Petroleum. It was a forced marriage between brains and brawn. The dealer had the brains and the bank the dough, both needed each other even if WG was the most desperate of the two. Amusingly CM is now the only bank that is run by an investment advisor proper! Leason, the guy that killed Barings single handidly , is now giving speeches on risk management.

Just looking at this chart tells you that , should this stock drop back into the green zone it really would not be that outrageous. A sell in our opinion as we are about to enter wave 3 of C