JNJ, Johnson & Johnson

July 28, 2012July 28, 2012 Hamilton

About 3 years ago when the stock hit $65/66 we suspected that this was a sell. Today after a peak of $69.70 it is trading at about $69. That is a gain of about a single dollar a year, for 3 years and that is only if you look at the extremes as on average the stock traded at around $62 over that time. In earlier blogs we have singled this stock out for its absolute text book , classic, EW pattern. Just to be superfluous here it is again, straight out of the book;

Actually we would go a little further, the textbook sample does not show alternation within the 5th wave wedge, whereas the real sample has a real clear triangle for a 4th wave and a zig-zag for wave 2. The nice thing about the wedge is that it has to be a 5th wave and ergo the top has to be the 2008 top at about $72. From there you basically have to go down to the 4th wave of previous degree and do so in an a-b-c pattern. We have done neither, but we will. This stock has now peaked above $65 and below $70 a total of 15 times. It is about time for something big to happen and it is not going to be up.

MMM update

July 28, 2012 Hamilton

This is the chart from just a little over a year ago, June 17th 2011 to be exact. Click on it to enlarge. Red is the original colour used for the whole count and the anticipated future. The lines are not intended to be precise as you go out further, just a ballpark best guess sort of thing. Purple is what has actually happened. The stock does retrace the entire wedge, does not stop at $72 but goes on to $69 and drops faster than expected. It then rebounds as expected but does about $10 more than shown, but it does do it more or less in the amount of time allocated.. Volume rises sharply to about 40 as the stock trades down and diminishes as the stock climbs back up. The “wild” ride anticipated has become even wilder due to our friends at the Fed. Wave 3 should start any moment, and if the past is any guide, should do at least as much as indicated (about $50).

Your broker will of course argue that this is all just nonsense, MMM after all is a blue chip if ever there was one and yes the p/e at 21 is a tad higher than the average but nothing to get concerned about. This is the buy and hold type of thing that you keep for the 2.3% dividend. Anyone who has ever been immersed in the psyche of the life insurance biz will be familiar with the story of how the poor and destitute emerged victorious after cashing in their whole life policies and rebuilding their empires with the proceeds. The reason, which is of course conveniently never mentioned, is that you sell your worst investments last, you do not hold on because you want to but because you have to. For most people MMM will be one of their best investments and therefore it will sell quicker and easier than that penny gold stock that has been no bid for a while.

Common sense, a very scarce commodity, would dictate a sell here as well. Anther $5 and we will have a triple top. If fear of heights does not set in immediately it is worthwhile to consider that there is a proven potential for a $50 drop, a risk/reward ratio of about 10 to1. Also those attracted to the H&S approach, may detect an inverse H&S pattern that is decidedly bearish even if this act of levitation could still go on for another year. There is also a “normal” H&S pattern that has no time left on the clock;

SLW, Silver Wheaton Corp.

July 28, 2012July 28, 2012 Hamilton

Silver Wheaton is a great company, it does not look for or dig up silver, it just collects “royalties”. Makes it a bit of a pure play. It is down exactly 50% at the lows. Both a bullish and a bearish count are presently possible, but either way, a move to about $32.50 should be anticipated. That is more than 10%! Use a stop loss. After that I prefer the downside but from an EW perspective that conclusion cannot be drawn unequivocally. Other stocks favour the downside as well, see for instance FR, First Majestic and HZU (down at 4 from 20!);

This one is almost certainly doing a small a-b-c AND still has to get to a reasonable target of $10. See previous blogs on this and HZU.

XOM and RDS.a the integrated oils, update.

July 28, 2012July 28, 2012 Hamilton

From the blogs, Nov 19, 2010, and July 13 ,2010;

Buy it here,…………………………………………………………………..Sell when it gets to about $75

The buy at around $57 was based on the near perfect wedge that had developed. The sell at around $75 was based on the simple fact that these wedges nearly always completely retrace, so that was a minimum expectation. Here is where we are today;

So the stock went a bit above the $75, but more importantly it took a lot longer courtesy the meddling central banks. For almost two years now the stock peaks between $85 and $87 without making any real headway. Here it is in detail;

This thing is a wedge, pennant, diagonal whatever. When, not if, it breaks down we will be back at the bottom and then some. Wave 4 of previous degree is not at $53 but at $30, easily attainable if C becomes 1.62x A. The stock was downgraded yesterday by one of the big European houses (UBS?) but the target was raised to $110, go figure.

Royal Dutch did something similar. Here is the old (Nov. 2010) and today’s chart;

This time the target was dead on but, so far at least, the anticipated drop has not yet happened, but neither has the opposite. If this is a 1-2, 1-2 situation things could get nasty real fast. The target, as with XOM is also around $30.

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