Year: 2011

FVI, Fortuna.

Hamilton

fvi sept 19 2011

Fortuna is an example in point. % waves may be complete, but then they may not be. If the sequence is complete we are looking at a B-wave that makes the stock double-top about where it is now. However is a simple 5th wave is in progress we could go all the way to the upper trend-line. Between those two is a triangle ( in blue) or a wedge (in red). Other counts may apply but they are not readily visible so , probable do not exist. Ergo if you short this now, or stay short, chances are 10 to 1 that the stock will trade back at least to $4.5 (triangle and wedge) or $3.5 (wave 3 of 3?) or even $3 (62%). In the end much lower levels may apply given enough time. In short you are almost guaranteed a return of at least 30% even if you are wrong by being too early.

NFLX, Netflix Inc.

Hamilton

Netflix was clearly, and without a doubt , in a bubble early this year. The problem is, like Keynes said, the market can stay at ridiculous levels longer than you can stay solvent. However, EW gives you some certainty even in the event that you might be too early, which invariable happens when using common sense when the market does not. Here are the charts then and now;

nflx mar 2011 nflx sept 19 2011

You may miss count a wave or two but in the end , after 5 waves are done the stock typically drops 62% or to the 4th wave, either of the entire sequence of of wave 3 itself! This is invariable a lot lower than where you sell short. This is not to say that it might not be a good idea to get out every now and than, provided you keep getting back in at higher levels. Fundamentally there never was any justification for this stock to trade at above $100 , let alone at $300.

In any event we were clearly too early with our recommendation to sell at around $225. But even if you had, and even without getting in and out, you would today be up nearly 30% in half a year. The stock should go lower yet. 62% is just under $125, the 4th of 3 is around $100. c=b of this zig-zag in progress at around $125. So $125 seems to be a reasonable target for the downside, initially. After the dust settles much lower levels could be reached.

CL , update

Hamilton

cl sept 17 2011

Colgate is doing every possible trick in the book to delay the inevitable. Even if we are a few dollars higher the story just becomes even more compelling. From the lows of $74 the stock has traced out a near perfect expanding diagonal triangle, always a 5th wave and always retraced entirely. There is even alternation between 2 and 4 as well a some degree of overlap, something that cannot occur other than in these specific structures. The puts should be even cheaper now. This favors the 4-5, 4-5 alternative interpretation  discussed in the previous blog.

RY, DB and GS

Hamilton

These three financial institutions do not have that much in common but they tend to go in the same direction much of the time;

RY sept 2011

The Royal is down roughly 25% and,if the count is correct, not yet at an initial low. As indicated in a previous blog $43 is about the mean level over the past ten or so years (see previous blog), and it seems to want to go there. The DB and GS are following similar counts;

DB sept 2011 gs sept 2011

There are a number of variations and with the RY and DB it is not entirely clear when the down-trend actually started but what they do have in common is that none of them are complete!