Year: 2015

HLF, Herbalife update

Hamilton

HLF march 15 2014 bHLF march 15 2015 s

We made a pretty astute call on this stock quite some time ago and are going to give it another try now that it is in the limelight again. Once upon a time in the late eighties or so there was a company that was called Nulife or something like that. A good friend of mine told me I should get into it because it would make us both rich beyond our dreams. If you could only see it in your mind’s eye it would become reality,  so his thinking went*. Unmoved by his arguments I responded by explaining what a ponzi scheme was etc.etc. and quickly found out how ferocious the cult like thinking and conviction can be in these circumstances. End of friendship. So let’s look at it from an EW perspective only.

On the left, the Bigchart, the 5-waves up into the top is straightforward, arguable there is even alternation between 2 and 4, there is an extended wave 3 of 3, the whole thing fits into a channel and 0 to $85 is a real bull market. Next a correction should occur wiping out at least 62% but often a lot more. All corrections should take the form of an a-b-c (or multiples of that). Our best (educated) guess here is that we are looking at an a down, a b back up, and now a c down which seems to take on the appearance of a diagonal or wedge. Legs 2 and 4 usually touch or overlap a little bit and all legs are subdivided in threes, not fives.  Should this indeed happen then $15 is a reasonable target.

* See Bob Proctor (not Prechter), as in The Secret etc.

PHX, update

Hamilton

phx march 15 2015

We remain constructive on this stock. Not only does it have a neat 5-wave initial wave up followed by a 62% correction, but now the Department of Energy has decided to weigh in on the matter by announcing,last Friday, the purchase of 5 mln. barrels to replace the sale of an equivalent amount precisely a year ago, supposedly because the stuff is relatively cheap now. 5 mln. is about 1% of the amount in storage (above ground!) so negligible by any standard but not in the context of market manipulation. The timing is bound to boost the narrative around oil if only for a little while, perhaps soon we can expand the Fed’s mandate to include stable mileage. It has a good ring to it, stable prices, full employment and even mileage. With regard to oil we remain of the opinion that another leg up should occur before oil drops to new lows ( see chart below), as is now also predicted by the Maestro, Alan Greenspan , himself. This should provide support to PHX.

oil march 15 2015

We did not get the triangle wave b, instead we got a clear a-b-c down for b (we think) so c up should get back up to , perhaps, $60.

By the way, if you suspect something nefarious is going on here you are barking up the wrong tree. The US is obliged, so they say, to buy back what was sold previously, within a year! So they are just fulfilling their obligations. How crucial that is becomes obvious when one considers that there are 4.1 BILLION barrels of oil salted away, so a drop of 5 MLN. barrels could easily jeopardize the US’ military and other capabilities.

Elsewhere the strategic reserves are estimated at 727 mlm. barels. Eitherway 5mln. matters little.

RDS.B , HAL updates

Hamilton

Then – December 14th , 2014 – and now charts, as usual.

RDS.b dec 14 2014rds.b march 13 2015

Roughly 3 months ago we anticipated a drop to about $59 and even anticipated the possibility of a triangle forming which would cause some big movements with little net result. We did get that but it remains unclear if there was a triangle. We are at the $59 level now and if the triangle was there it would most likely be a 4th wave triangle as opposed to a B-wave. This is easily accomplished by adjusting the count  to start with two 1-2’s. This then completes wave A down with a B and C to follow. This is tradable as the B could easily go as high as $75 and in the meantime you are earning a 6.1% dividend in the , now hard, US$ currency (on the ADR’s).

In the alternative it was a B-wave triangle and the second part of this correction has already started. That could take the stock down to $45 or even lower in a jiffy. For the moment we do not expect that. Using HAL, Halliburton (and SLB, not shown) it would seem that a time to pause is just around the corner;

HAL march 13 2015

Note, first of all, that HAL already dropped 36.47%, a lot more than Royal Dutch. Next it did not have the big swings recently and has essentially gone sideways supporting the notion that it was one single 5-wave leg down. The RSI will soon be oversold (it is already with Shell) which also suggest a period of pause for the next little while (defined just like with the Fed. as when I change my mind, but data based!).

Shell is one of the few true blue chips left. It is the go to stock for widows and orphans and has been that for a very long time. At 6% your money doubles in 12 years which is a lot better than what you get on a ten year note, with, arguable, a substantially lower risk.

K, Kinross update

Hamilton

k march 12 2015 lK march 12 2015 b

See also previous blogs on this stock. Earlier we had suggested that a new low should be expected on this stock. However, on second thought that is not necessary, at least not if you use a semi-log scale chart, the one on the right. What we are looking at is a very simple a-b-c down correction from the peak of Mnt. Everest back in 1995/6 at almost $40. For some inexplicable reason the markets love symmetry and consequently you will often find that in any a-b-c the c is equal to the a, either absolutely or as a vector and sometimes all three legs are equal as vectors. In this case that event would occur where the blue line from inception connecting the lows and the red circle with a radius of a, intersect. Should the stock drop to that exact point you have paradise in EW-land. In detail it looks like this;k march 12 2015 s

You work with what you have and here the bounce from the November lows is an unmistakable and perfectly formed a-b-c correction, implying a new low. The bottom of big wave A down in 2000 was at about $1.86 so if a new low is required despite the above comments $1.85 would do the trick.

From a fundamental point of view these guys have made every mistake in the book, one of colossal proportions (7+ billion and counting) so perhaps good times are ahead. They even pay a dividend of 5.4 %, higher than any of our banks. In our opinion this is what is meant with buying low and selling high. All though you do not know where those points are you at least do know that the low is no more than $2 off.  An initial target of $6 is a minimum expectation so that would be a 3x gain. After that $11 is very realistic.