RY, Royal Bank update #52

July 21, 2014July 22, 2014 Hamilton

If you predict, do it often!

The Royal started in 1856 but only took on its present name in 1901. It is from Halifax. In 2007 this bank was 106 years old and assuming it started at ground level had a stock valued roughly at $60 higher or about $0.57 per year. The low in 2009 we correctly pinpointed in advance (see old blogs) as $26. From there it has gained roughly $54 over 5 1/2 years which works out to $9.82 per year. This, of course, in the aftermath of the great recession which really wasn’t in Canada.

The count is not clear and differs for the 5 big banks in the country. So we just look for what normally would happen. The stock would trade within a , usually well, defined channel. Here in blue. Having passed $70 or so we are above it. Then there is the possibility of a large wave 4 triangle, very compressed but a triangle nevertheless. None of the others have this. The triangle typically targets a level that can be found by connecting a previous top through the top of the b-leg. That works out to about $77 and we broke that. Measuring the “mouth” of the triangle gives about $35 and added to the low of e of $45 comes to about $80 or perhaps a little higher. Basically we are there! If we use the B-wave concept and , as always, look for equality we would find that at $81 give or take. There is only one line left, connecting the tops, in turquoise, that might point to a higher level around $92. But, looking at a detailed picture;

We see that wave 3 is smaller than wave 1, therefore in order that wave 3 does not become the shortest wave, wave 5 logically has to be shorter than 3. In this case that works out to less than $82.50. On top of that, the RSI which for this particular stock has had very good predictive powers, is at its most overbought for the past three years or more. This is a sell and I hope that call will be as correct as the $26 buy in 2009. Good luck.

Below is that blog of Jan. 22nd 2009 , still done by hand. Notice that that chart is pretty well the mirror of the Bigchart above albeit on a different scale;

It called for a rise to at least $38. Today I would change the count to an A-B-C instead of a 5-wave sequence. The C is a diagonal and normally is retraced entirely which would have given an initial target around $52. By the way $26 was a 50% correction of the entire value and a 61% correction of wave 3 from ‘89.

WBQ, IShares MSCI Sweden Index.

July 20, 2014 Hamilton

We use the WBQ as a proxy for the Swedish stock index (simple because we could not find a good chart of the OMX). The nice thing about EW is that there are only a handful of individual patterns, so even if you have no idea where you are in a sequence you still have a good chance of calling the next move correctly. What we have here is a classic example of a “diagonal” which is a wedge in plain English. Unlike most impulsive E-waves this pattern consists of a 3-3-3-3-3 structure, no 5’s at all. Another exception is that overlap between waves 4 and 2 is common whereas elsewhere it is an absolute no no. Otherwise wave 3 cannot be the shortest. With eight points at the top line and 5 at the bottom this is a classic specimen. Sometimes these structures seem to go on forever but in this case there is not much time left and we already have a clear break of the bottom line. If our analysis is correct the target, as a minimum, should be the base of the structure, that is 21.42 or down another 37.5% This should happen rather violently and could be done in about a year. The CAC and quite a few other indexes sport the same pattern.

TRQ, Turquoise Hill Resources update.

July 17, 2014July 17, 2014 Hamilton

In many respects TRQ, the old Ivanhoe, resembles AA. The big difference is that it has done very little so far. As we have no reason to change our analysis we continue to like this stock’s potential. At the low of $3.20 on the 3d of January 2014, this stock had, just like AA lost 90+% of the peak value and was sitting right on the long-term support line. Perhaps this is what the Fed. means with “psychological trauma”, the new economic term added to the lexicon of Fedspeak, the other day. Click on the graphs and move them side by side to get a greater appreciation of the similarities.

AA, Alcoa update

July 17, 2014 Hamilton

See also previous blogs. We first recommended this stock on July 7th, slightly more than a year ago, when it had traded at a low of $7.54 a few days earlier. The pattern is that of a large, 13 year long, A-B-C correction that does absolutely all that it should except that the 5th wave of C did not establish a new low. It seems to have been supported by the 40+ year bottom support line. In any event we were fortunately not looking for perfection. Here again we are not. The stock could go a tad higher to just above $18 where the 4th of C resides but we would nevertheless sell now for an easy double in one year. For those that find math a challenge, that is equal to a 100% gain.

My laptop is on its last legs so some interruption to this blog is unavoidable. Stay tuned.

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