ABX, American Barrick

We have never been all too fond of this company and became downright negative after RBC put it on its focus list quite some time ago. Here is why;

ABX jul 26 2012 l

For a number of years during the late eighties this stock, and also Franco Nevada to mention but one other, was the darling of gold speculators expecting a repeat of the metals performance from roughly 1973 to 1981. Instead they got one of the best formed triangles ever, lasting a little over ten years, (I was focused on Hecla and never looked at ABX).

Triangles occur one leg before the last, which is , of course wave 4. The somewhat violent jump up is called a thrust. Typically it has an amplitude roughly equal (or 1.62X) to the mouth of the triangle, shown here in purple. It is a 5th impulse wave and as such should subdivide into 5 waves. It shows overlap but that is OK as it is a “diagonal” with a nice throw-over at the end. The A makes it right to the lowest level of the e-wave. The B-wave makes a new high and now the C is on its way down to about $17. Here is an old chart from Jan. 2011 showing the B-wave in detail and a chart of what to expect as of today.

abx jan 14 2011ABX jul 26 s 2012

Notice (click to enlarge) that the B-wave is also perfectly formed. After the top we get a rather messy 1-2 that consumes an entire year without going anywhere. Then wave 3 of C which took us to the low of $31.18, almost a drop of 50% just in the third wave, money you could have saved reading previous blogs. A pretty good rebound should now follow for wave 4 and it could again take a whole year! It cannot trade above $46 for this scenario to stay valid. $42 is a better guess for the rebound. After that wave 5 will take the stock to around $17 or so. What a hedge!

So it is a buy now for a gain of about 30% (from today’ low) , then neutral at $42 and a short above, say $44.

PS. Wave 2 is messy, I have used blue to show the composition. It is irregular and consequently I would expect wave 4 to be a sideways “flat” or again a “triangle”.