Month: January 2011

PGE Pfizer, COM Cardiome Pharma.

Hamilton

PFE 2011 big

It took ten years to go from $3 to $50. Then it took  ten years to lose 76% (a Fibo#) of that. PFE was in good company during this slide as many other large pharma (specifically Merck MRK) companies did exactly the same. See previous comments, but it now looks like we have a breakout that may signal a change in fortunes. Yes Lipitor is going generic soon but they also acquired Wyeth not too long ago. The population is aging and the stock has a dividend yield of 4.4% and a reasonable P/E ratio. In my opinion this stock has a very reasonable asymmetric risk/reward profile.

com 2011 

Cardiome Pharma Corp. lost just as much in less than half the time. It also operates in the vascular space. It is relatively small and accordingly the risks are substantially higher. But there appears to be a very intriguing pattern (expanding wedge) that could imply that the stock will shoot up to $11/$15 soon. A speculative buy at about $6.

S , Sprint Nextel Corp. update.

Hamilton

S 2011 both

This mobile telecommunications company looks much better on a semi-log scale than an arithmetic one. The two down legs look a lot more equal. In any case after a drop from $75 to $2, it is reasonable to assume the “correction” is complete, any further and the stock is gone. The more detailed chart below, shows a good opportunity, at least for those that do not mind the odd, serious, gamble.

s 2011 s

Invariable after a large drop there is a rebound. Typically the rebound will , at the very least , take the form of an A-B-C. In this case we had the A, from $1 to $6, then the B as a triangle that has taken almost two years and may need just a little extra pull-back to complete the e-leg in the triangle. Then C should propel the stock to about $9 (equal to A) and this may take about 6 months. This is the time wave a took and it is also precisely where the apex lies. After that the stock can continue to the moon or go off the board, neither matters because by that time you are out of the trade. Buy at $4 and stop at $3.75 and sell at $8 oco. If the stock breaks the upper triangle line and trades above wave b (about $5), it should simple be bought.  Put the sell order in  immediately after being filled. Sure the stock could go to $25 or higher but we only want the (almost) risk free part. This could all happen in a very brief period of time, therefore it is essential to put the sell order in in advance in order not to miss it.

MFC, Manulife.

Hamilton

Back in August when the stock was around $11 we recommended it for , at least, a $5 up move. On Jan 6, just a few weeks ago, we recommended taking the $5 and stepping aside while fully acknowledging that the stock could go a lot further. So far it has not.mfc 2011 l mfc 2011 s

For the past month or more the stock has been hugging the upper trend-line (in purple, right chart) of what could be an expanding diagonal wave C, or even a 5th wave. If so the next big move would be to the downside, to a new low below $9.

If the markets overall are OK, a bit of a stretch at this point , then the stock could climb , gradually, into the high twenties, above the old high of $26. At the very least I would use a tight stop on this stock.

Just to clarify, the Nikkei appears to be in a similar position, only on a much larger scale. But the pattern is the same. Here it is for illustration purposes.

Nikkei jan 2011

You would presently be at the (purple) 4 if this happens.

Looking at SunLife (SLF) and Great West (GWO) does not add much to the equation;

slf 2011 gwo 2011

Both have done (relatively) better than MFC and both seem to favour the upside more than the downside. But then neither have the same degree of exposure to the stock markets. MFC has done some hedging but I believe it is only about 25% of the book, and it is now very expensive to do.

L, Loblaws

Hamilton

L 2011l l 2011 s

This is a grocery store  stock that got killed a few years ago. It lost 2/3 of its value and dropped into the level of the 4th wave of 3 and then some. The drop is a perfectly symmetric zig-zag, 5-3-5 structure . By all standards this very likely means that the entire “correction” is complete. Even if it is not , one would expect an initial rebound back to the wave b level of the correction at about $55, and possible much higher thereafter. From the present $39 that is a gain of about 40%. In this scenario the stock should not trade below about $37 as this would cause overlap, so $2 risked to get $16, an acceptable risk/reward ratio.