Year: 2011

CML , CML HealthCare Inc.

Hamilton

This stock trades on Toronto but has operations in both Canada and the US. It recently converted back to a normal corporation from an income trust and has adjusted its dividend payout to a level that equates the previous distributions (that is for Canadian residents holding the stock outside a sheltered investment vehicle such as an RRSP.  It pays $0.75 per annum which at today’s stock price of about $9 gives a return of 8.33% (or after normal dividend gross-up around 11.75%). It is in the business of community based healthcare services. Doctors typically refer patients to these healthcare providers to have things like routine blood/urine and whatever other tests done. The results are simple e-mailed back to the doctors who do the actual diagnostics. Illnesses such as diabetics, high cholesterol , certain cancers, being overweight etc.etc. that are mostly diagnosed on the basis of these test promise an ever expanding clientele and at least in Canada it is mostly Government paid.

Here is the chart;

cml may 2011

This is the best chart I could get. It is from the company’s own website. The move from $10 to $17 is very obviously a B-wave, implying that the drop back down must be a C. In this case it looks and feels like a “contracting diagonal triangle”, or in English, a wedge. (think Ford). Typically these wedges retrace themselves entirely , that is once the low is in back to about $17.5.  The low should be at about $8.25 , but most times they do not get to the extreme; occasionally they exceed it. So where can you get a double and earn 8+% ?

KGI , Kirkland Lake Gold. Kinross warrants.

Hamilton

 kgi l kgi s

Being rather agnostic about the entire gold sector I try to be as objective as possible. Here is a stock that may well go up over the next few months. RSI and MACD are both positive and the stock appears to have traced out a nice triangle which could  be in the 4th wave position. If correct the stock should rise to about $17/$18.On a log-scale the A and C legs would be about equal, each having tripled more or less. Triangles can also be in B-wave positions and therefore a stop-loss should be used (at about $13)

 

 

kwtc compared kwtd compared

One of my faithful readers mentioned that there is also a warrant d on Kinross which might be a better buy than the c warrant as it has a longer term to expiry. I would agree that the longer life of the warrant improves the chances of getting a positive result. However this is a personal inclination and not necessarily a mathematically correct one. As with options generally you get what you pay for (not really) and the price at all strikes and expiry dates should properly reflect the risk/reward aspects. Short options can be done repeatedly for the price of a longer one. Similarly many out-of–the-money options can be bought for the same price as a deep in-the-money one. The choice is mostly a matter of preference.

I would prefer the d warrant as well but would never have seen the rather perfect “wedge” that is so visible on the c. You can buy 2x as many c warrants as d warrants and should the stock climb back to where it was last October the c would triple (from 1 to 3) whereas the d would grow by only 2.5x (from 2 to 5), all this assuming all other things being equal which they are not.

CL , Colgate Palmolive update, see also April 6 blog

Hamilton

 

cl may 2011 cl may 2011s

Colgate was up more than $2 today. As expected it is increasing the speed at which it is looking to get to the ultimate target. As indicated earlier two counts are plausible. Most elegant of the two is the notion that we are in a 5th wave wedge, now in its 7th year. This is because of the overlap that has occurred. A very plausible alternative would be a 1-2, 1-2 start which then requires a 4-5, 4-5 finish to complete the 30 year 5 wave sequence.

There may well be good reasons to prefer one count over the other but it is purely academic as BOTH counts call for a fairly drastic drop at the very least to $55, but more likely $45 or even $35 where the 62% retracement level lies. By the way, this is not a bearish call, just one that recognizes the normal ebb and flow of stock cycles.

My target for a top was about $90. Now that some time has gone by – a month – a more accurate guesstimate would be $92. At a rate of $2+ a day we could be there within a few days!

cl options may

In the mean time the 85 strike 2013 put is moving towards the expected level of around $7, in fact, should the stock move to $92 or about $5 up from here with a delta of about 0.5 (we are at the money) the ask could drop another $2.50 which would bring it to $6.40 all things being equal.

Some may wonder why , if you expect the stock to go up by about $10 or a little more than 10% you do not recommend buying it. The simple answer is that I do not like playing 5th waves from the long side. The new high may only be marginal and the risk is at its highest!

CCO , Cameco update

Hamilton

CCo may 2011 big cco may 2011

Cameco is performing in a text-book manner with each and every wiggle conforming to EW rules and guidelines. Here is a refresher. The stock did an A-B-C counter-trend rally after the lows of Oct 2008 at roughly $15. This may only be part of a much bigger correction, we simple do not know. But the stock will have gone down in 5-waves from the $44 high and should therefore rebound perhaps by one half of the drop, about $10 to $11 depending how low we go. Today we are on the big fat line connecting the lows and that may hold were it not that the pattern is not (yet) complete. A minor 4th and 5th wave (of 5 ) still seem to be needed which could take the stock to the $22 level. This is the extreme so it might be smart to buy a little above that. The gap-in-the-middle-theory would suggest $24 as ideal.

The target is at least at $32 which is where the gap starts closing and where there is a triangle wave 4 (of 3), both “normal” targets. Even at today’s price that would be a nice return, assuming this is correct.