BBY, Best Buy, perhaps it actually is

bby dec 31 2012 lbby dec 31 2012 s

If you are going to make New Year resolutions, here are a few to consider.

1. Buy low, sell high. Most people actually do the opposite. True we do not know what is high or low but a little common sense should give us some inkling as to what that means.

2. Wait for a completed pattern or for a stock to get to a “logical” target.

You may still get it wrong but chances are you will do a lot better!. Best Buy is a good example. It has completed a huge a-b-c down from about $55 to $11, a drop of 90% or so. It has also gone to the 4th of previous degree and appears to have completed a full EW cycle, 5 up and 3 down. And if you happen to like technical analysis (EW is not!!) the RSI and MACD seem to be supporting some turn soon. The p/e is at 3.76 and the yield around 5.8%. For contrarians, and you should be one most of the time, 10.4% of the stock is sold short.

There are no guarantees that this will work each and every time, but if you keep doing it you will do better than listening to hot tips from your neighbour.

DJIA update

djia dec 31 2012

We first presented this idea that a large “diagonal” was forming in August or even earlier. Now that it is complete together with the first wave down and a rebound back to the trend line the pattern truly does look textbook. There are a few important characteristics about the diagonal, wedge, rising flag, pennant or whatever you may wish to call it. First of all it is an exhaustion pattern, that is it always occurs at the end of the ride (wave 5 or c in EW terms). In this case we assume that it ends wave B from the March 2009 lows and has turned. Secondly, invariable these diagonals are retraced in their entirety, that is back to the base (or further!) as a minimum. In this case that should be about 3500 points. Not only does this normally happen, it also tends to happen rather violently. Given the two years plus that it took to complete, it would not at all be surprising if the drop was accomplished in less that 1/2 year. Such a drop would be accompanied by a collective “new” insight that our present pavlovian dog approach cannot yet contemplate.

Fundamentally there are problems galore that remain unsolved. The US spends $1.40 for each $1 that it takes in and despite all the hoopla about the fiscal cliff there is absolutely no conviction anywhere that something needs to be done about it. The European union and the Euro are fraying at the edges but there is no interest at all to cut out the rot. Japan is gradually on it’s way to oblivion given the debt levels and demographics and that is without starting its own Falkland war. China with 46% of GDP coming from “investment” as opposed to consumption is working very hard to set a new world record of capital misallocation that is invariable followed by colossal capital destruction. Canada is oblivious to everything,enjoying a very long period of hibernation.  With all that we do not need the ice to melt or Sumatra to blow up seriously as it did 73000 years ago, it will be self inflicted for the most part.

WHR, Whirpool update

The then , Oct. 2011, and now charts;

whr oct 2011whr dec 29 2012

At least we recognized the rather clear and distinct A-B-C down from the top, which may actually have been the top of the 5th wave. Right here there is no count  that can be treated with any degree of confidence, but should it triple top we would nevertheless sell. In fact if you do own this from the $50 level you have a 100% gain and may wish to sell in any case.

ELUXY, Electrolux update

eluxy dec 29 2012

We though the C wave had started in earnest with the last drop to below $30, but it proved to be just part of a b wave ( see previous blog). In terms of consumer electronics this company must be among the best performers. At around $60 it’s fortunes should change as the C leg takes it down to somewhere in the vicinity of $10. As noted before, for the duration of this chart the stock has lost or gained more than 50% ten times now, a double top is maybe all that is needed to start the process for the 11th time.