Year: 2012

IBM

Hamilton

IBM aug 27 2012

Back in Jan. 7th 2012, half a year or more ago, we confidently predicted that IBM would not trade above $195. The actual high was $210,69, so we were wrong again. The argument then was that for most stocks the 3d wave is by far the strongest and longest, even if that is not an absolute requirement. Many exceptions exist but for the most part they occur with commodity related stocks, not with the IBM’s of this world and therefore it is reasonable to assume that a 5th wave will NOT be longer than a 3d wave. This still may be a correct assumption as it all depends on where you start the 5th wave. We had originally assumed that there was a triangle from 1999 to 2006. In retrospect it would seem more appropriate to assume a large flat all the way to 2008/9. This has the effect of pushing the starting point a little higher and making the 5th wave channel bound within a very narrow range. The speed at which the stock travels from one side of the channel to the other is the same for the 96 to 99 move and the 09 to 12 more recent one, both being about $100 in 3 years.  The very clear periodicity we pointed to earlier still applies when using the mid point of the B-wave (2006). Roughly every 6+ years this stock changes direction and loses at least half its value. The $210 high was probable such a turning point.

For most of the past century this company was probable best known to outsiders for its dress code. Dark blue or grey 3 piece suit, white and only white shirt and an unobtrusive tie. Now few people have any idea what they stand for or do. Even the, very heavy, electronic typewriter that seemed to grace just about every office has disappeared from the face of the earth.

JNJ, Johnson & Johnson update

Hamilton

As with CL it is possible to count the EW sequence for JNJ with a series of 4-5’s. The end result is still equally bearish;

jnj jul 2012

This is what we had, see  July 28th blog. Here is the other possibility;

jnj aug 27 2012

Instead of a single multi year “wedge” 5th wave, two 4-5’s can be inserted assuming that a similar series of 1-2’s occurred back in the eighties. Both counts call for substantially lower levels soon.

CL , Colgate Palmolive update

Hamilton

cl aug 2012 s

Timing is everything. This one we got wrong. This is what we have been expecting for quite a while now (see previous blogs). The whole thing would have ended with a wedge and a price of about $92. Clearly that is not how things turned out. It would have been unrealistic at the time to assume that this whole thing from the lows could actually take 4 to 5 years and another $18. However, in our defense, we did point this out as an alternative(see blog of Aug. 31, 2011) as in the (updated ) chart below.

cl aug b 2012

Rather than a single wedge wave 5, this count anticipated a series of 4-5’s. The target (depending on the time) somewhere in the order of $100+. We are beyond that by about $9 which could simple be a usual “throw-over”. Comparing CL with the S&P500 clearly demonstrates the unusual “blue chip” behaviour of this stock;

cl and S&P

This comparison covers the past 5 years, 2007 to the present. The S&P has done virtually nothing on balance over that period, down marginally by 4.61%. Colgate, on the other hand is up by 56.78% for an outperformance of 61.39% (nice Fibo #). Looking at it in comparison to one of its main competitor Unilever NV (UN),produces similar though smaller results;

cl and un

Unilever shows an increase of 14.53%, but if you go back a little further in 2007 the stock is actually down by about 6%. Cl, as before is up 56.78% . Cl has a p/e near 21 and UN closer to 18. The stock is again a sell, and this time there is no clear alternative in sight.

ABT, Abbott Labs update

Hamilton

In two previous blogs (Jan 5 and July 7, 2012) we discussed the likelihood of this stock going either to $72 or $69, depending on how big a triangle , 12 year or 4year, you assumed occurred. Time wise, from the June date we mentioned the possibility of this whole process taking another 2 months which makes it about Sept 7, roughly now. Here is the chart again, showing only the smaller triangle;

abt aug 25 2012

The highest reading , so far at least, was at $67.45 just $1.55 away from the target set 8 months ago when ABT was trading at about $10 less. Still we are not perpendicularly above the apex and nor have we used the total width of the channel (purple lines) so $69 or even $72 are still possible. The problem is that these charts do not necessarily show the highs and lows of the day, they are pretty rough. To fine tune this a little here are two more;

abt thrust 1 2012abt thrust 2 2012

In the short-term Big chart above the triangle’s mouth is precisely the distance travelled in the thrust, which would argue that the top is in. However it could well be that the mouth should be measured some 8 months earlier which would add about $3 . This would bring the thrust high to around $70.  It is furthermore possible to count the thrust as having completed 5 waves already. Given that this is little more than a best guess another high should not be excluded. It is fine to split hairs but if you own this stock you should dispose of it now. If you do not own it , it might be a good short, now or a dollar or two higher, next stop is at $41

For less than $5 you can buy a Jan 2014 put with a strike of $60. The Jan 2013 put goes for $1.15. You get what you pay for but the shorter the term the bigger the bang. Rolling over a short-term put is some times the best option.