Year: 2012

RY, Royal Bank of Canada (blog #42)

Hamilton

ry oct 23 2012ry oct 23 2012 log

ry oct 23 2012 s

It would seem to us that the Canadian banks now have the wind in their face, in such an overwhelming way that is almost a miracle that they stay suspended at these lofty levels. The obvious reason is , perhaps, that there is literally nowhere else to go. Banks form a large part of the TSX and with the 5 pillars now gone the way of the Do Do bird, the banks, through their investment dealers, are unabashed promoters of their own, or each others, stock. Also, as a result of the 10-fold increase from 2000 to 2007, most ex- and present employees are loath to sell as they would be subject to capital gains taxes and would not be able to collect the same amount in dividends that are in any event quite generous. Essentially they are frozen in (except for some capital gains crystallisations, that can be too complex). In the mean time the banks are spreading their tentacles deeper and wider into the fabric of life in Canada, picking up Ing Bank, one of the few foreign banking operations able to hold its own, Target’s credit card business and now Ally’s (former GMAC car loan business) just to mention a few.

Now if we were to try as hard as we can to find a bullish interpretation for RY stock, it would be that we are in a huge diagonal triangle that still has a little upside left. When looking at the semi-log chart, on the right, the proportions are not all that ridiculous. The diagonal is a structure within which all legs, both up and down, subdivide in three separate legs.It is the only structure that has overlap. Without too much imagination that may indeed be the case. The structure should peak in a few months and should stop at around $64. Paradoxically this positive view now is actually more bearish later as the “logical” target is around $15 when the structure collapses.

Given that there are 5 peaks the stock obviously has a problem breaking out higher. We prefer a count that views the 2nd top as the top of a B-wave followed by a 1-2, 1-2 type of sequence, or , alternatively a slight failure. The target for this is around $25.

Note that the count in the semi-log chart differs from the Bigchart. It would have the actual top in 2010

BNK, Bankers Petroleum update

Hamilton

When this stock closed at $1.46 we warmly recommended it as a buy with a first target of $3.50 (see previous 2 blogs), good for a gain of 140% in less than 3 months. We were wrong again. The stock went to $3,56. Here is the chart;

bnk oct 23 2012

$3.50 was just a first target based on absolute minimum retracement targets. It now looks like the stock may continue upwards, once a small be is complete at about $2.50, towards $5.5/5.70 or so, the level of the 4th wave of previous degree and a 50% retracement.All of this is very tentative so do use stop loss orders where and when applicable. Good luck.

PHG, Phillips Electronics

Hamilton

The following chart and text is from October 28, 2011, almost exactly a year ago;

PHG oct 2011

A year has passed and again, here is where we are;

phg oct 2012

We are right in the predicted range and are therefore sellers. 60% for a year is nothing to sneeze at, particularly not since this trade was not based on any EW insights. $27 is where the upper trend line runs and it may still get there, but we prefer getting out now.

From an EW perspective a case could be made that the latest run up from $16 to $26/27 is in fact an e wave in a large triangle, otherwise it might be a 4th wave in the leg down from $36. Nothing is terrible convincing.

AAPL update.

Hamilton

aapl oct 2012

Counting the waves is not an easy task, certainly not if you haven’t got the detailed charting required. Superficially this looks like 5 waves, from $6 to $700. If correct that would imply a drop to about $350 for starters. This would be a conservative estimate that may even apply in an ongoing bull market. The risk/rewards just do not warrant holding on any more. This week has a lot of announcements and so on so we would exit now.