CP, Canadian Pacific Railway and CNR, Canadian National Railway

July 2, 2012July 2, 2012 Hamilton

The charts do not have the same time frame! CNR is the larger of the two and the only one with East to West and North to South capabilities. Up to 1995 it was a crown corporation. But it is CP that has adopted the beaver as the animal to emulate for its smarts, engineering capabilities and enormous level of energy, in short all those things that Canadians have in abundance. But in the opinion of one Mr. Ackman of Pershing Square, a hedge fund, the company has very little of those attributes. So after a few years of yanking at its chain he has managed to crown the ex-CEO of CNR as the new CEO of CP, a fellow by the name of Hunter Harrison , a 67 year old no nonsense American from the South. All this is interesting simple because it is so un-Canadian, otherwise we will not comment on the merits of all this.

However, looking at the charts and adjusting for the time difference, the performance is not that dramatically different as both start between $10 and $20 and move up to $80 to $90. The operating ratio was the tricky part, at which the beaver consistently underperformed. Lots of excuses from snow to no-snow, from bulk goods to normal freight etc. etc. failed to explain that and ultimately a change at the top was the only solution. Unfortunately that will probable do absolutely nothing for the shareholders. CP (see a previous blog) probable topped out months ago while CNR is also ready for a big correction. CP completed a B-wave while all this was happening and CNR a 5th wave. Both could lose about $50 in the next few years. In detail;

CP had a nice run-up as all this was going on and perhaps all the good things coming from this, supposing there are some, are already discounted in the stock. This one looks like it will turn out to be a buy on rumour, sell on fact situation regardless of whether or not there will be a fact other than this recent CEO appointment.

By the way, if you look closely at the channel drawn in the big Yahoo chart of CP, you will notice that the above expectation would be fulfilled just by regression (reversion) to the mean – often referred to as the surest rule in the stock market – , at about the mid-point of that channel. Nothing really to write home about.

OSK, Osisko Exploration Ltee. update

July 2, 2012 Hamilton

Back on May the 12th. a Friday, we wrote that this stock should be bought on a lower opening the next Monday. That day it traded as low as $6.25. It did not break the $6 level that, according on the count, it could not do (see the blog). Here is the chart today;

The stock shot up to $9 and then dropped back most of that. An a and b in our opinion. Now we should get the c, or, alternatively, the 5th leg down was not yet complete but still it should not go below $6. If the ABC, with C as a diagonal is correct, this one could retrace the entire C wave bringing the stock back to $16. Both the RSI and MACD are in up mode.

BCE, Bell Canada Enterprises

July 2, 2012July 2, 2012 Hamilton

BCE almost self-destructed back in the tech crash and of course it’s precocious and better known offspring, Nortel Networks actually did. For the record, I have been wrong on this one never expecting it to get back to the Teachers et. al. $41.60 privatisation bid, which itself resembled the recent Greek tragic saga but this time entirely made-in-Ottawa, with bureaucrats on one side and ex-bureaucrats on the other.

This company, like most Canadian blue chips, owes its existence to the strong belief here in Canada that uncompetitive and therefore safe is the way to go. It is a regional monopoly, together with Telus , Rogers and a few smaller players, each with their own fiefdom. It is not unusual today for a family to pay more for TV, phone and internet than they did 30 years ago on their mortgage! By some estimates rates here are about double what they should be. Also it is no coincidence that the richest man in the world figured this out on the other side of the US.

In EW terms there is an initial drop of 5 waves (?) followed by a long drawn out A-B-C, a correction within a down trend. The correction looks like it could be complete or go on for another year or so but in dollar terms it should not gain much further. In fact, like with Rogers, the peak at $42 may already have occurred about 6 months ago. Time to tune out.

Just like with Telus this C-leg is very suspect. For most of the time the stock has a range of about $2 or 5%, this while the financial system seems to be breaking down for a second time. It is climbing on momentum created by memories of blue chips and a general lack of choices. No broker has ever been sued for buying BCE, an oddity itself considering how ridiculed the stock was. These things go on un till they stop and then there is no support other than the bottom , that is below $18.

T, Telus , common sense?

July 1, 2012July 1, 2012 Hamilton

Telus is one of Canada’s few darling telecommunications stocks. Before we have a look at the EW count, what should a prudent investor do using just common sense? Suppose, for the sake of argument, that one could time the market, which we are continuously told you cannot to give weight to the idiotic “buy and hold” approach – you would have made $55+$60+$35+$30 or the sum total of $180 for the last 4 moves. If one could catch just 1/2 of that the result would still be a gain of $90, substantially more than by holding for the past 14 years or even 20 years.

Over the past 20 years the stock has only been higher for perhaps 3/4 of a year. Obviously that does not change the chances of the stock going up or down but given the wild swings and applying that very sensible “a bird in the hand” approach it might just be wise to exit. Also, twice is a coincidence, but three times is a pattern! And here we have that pattern, a triple top.

In EW terms, the drop from 98 to 02 is a beautiful, absolutely perfect 5-3-5 zig-zag, which is a complete correction, most probably wave 4 as Telus flirted with bankruptcy. The big move up into a new high would then be wave 5, which wave can be subdivided in 5 separate waves though not necessarily as shown. Then the initial 61% drop is wave A of the next bear. The stock retraces most of that in what must be one of the most “phony” bull moves ever, zero volatility, straight line up for 3 years, see below. That is the characteristic of a B-wave. Next on the menu is wave C of this flat, right back to $30 or lower. In fact much lower as the 4th of previous degree is at $5/6

Share this:

Share this:

Share this:

Share this: