Month: January 2017

JNJ, update

Hamilton

jnj jan 18 2017

In 2012 this stock looked like the bull was over at about $72. It did drop a little from there but almost immediately started its trek up once again. Today, it looks pretty ripe again.

I have never fully understood why a bull market sequence should consist of 5 waves up, other than noticing that this is often the case. Even then the actual counting of the waves is more an art than a science. Often it is really not possible to do in real time with a high degree of certainty. Also the constant mention of alternatives is, in my opinion, not always helpful. With those caveats I think JNJ may have peaked.

The single most important attribute of EW is that it must look good. And yes that is mostly in the eye of the beholder and why you do not listen to every Tom,Dick and Harry who pretend to know how it works. Here, fortunately, there are many supporting factors. The channels work relatively well. Wave 3 is still the longest, at least under one count which includes a triangle for wave 4, but barely. This is normal. There are a number of variations that would fit this chart but however you slice it, it does look complete.

Assuming the above is correct than this stock should drop 62%, to the 4th wave of previous degree, the triangle if there is one etc.etc., roughly to $60 which is cutting the value in half. If this could happen to JNJ,  a defensive stock and a pillar of most investment strategies, what is in store for the market as a whole?

Below is one variation using Google Finance which covers a longer period. Here we introduce the possibility of a “running flat”, that is one that is skewed slightly upwards. The triangle could be part of that, i.e. wave c. So the whole thing could be 8 to 9 years long.

jnj jan 18 2017 2

DOL, Dollarama update

Hamilton

dol jan 17 2017 bdol jan 17 2017

This one we got wrong. At about $85, after coming down from around $93, it looked to be a sell. Clearly it wasn’t.

This is a family business started in 1910 or so that went public in 2009 after a period during which Bain & Co. held a stake in it. The MO is relatively simple, buy low and sell high. This is relatively easy to execute if you confine yourself to things like paperclips and balloons. You buy for 50 cents and sell for a dollar and given the relative small size the purchaser is rather price insensitive. Gross margins run at about 40%. Provided there is a low level of  saturation, about 2/3 of that in the US, and product can continue to be sourced cheaply, read China, you can continue to expand for quite some time. But perhaps we are getting there given the large number of stores in Ontario, the deteriorating exchange rate CAD/Yuan and the rising minimum wage. This is like a Walmart,  particularly as they keep introducing new “pricepoints”, now up to $4 rather than the original $1. But we go by EW, not fundamentals.

      EW wise we can, again, distinguish five waves up forming a sequence. Wave 5 is approximately of the same size as wave 1. Wave 5 hit the upper trendline already, but could do so in the near future in a “thrust” from a possible triangle. Both the RSI and MACD are rather anemic . And we hit the Mnt. Everest $100 mark. A sell.

Volkswagen, revisited

Hamilton

volkswagen jan 16 2017

Back in the good old days of 2008 this stock traded close to $125. In the great recession it dropped to almost $12 or so. It is difficult to get a good long term chart! In any event it would seem to be probable that a new bull started around 2009 and that the rise to $50 is a first leg up.

       From the $50 level there appears to be a single fast and furious 60% drop to $20. If that is correct it cannot be a complete corrective wave 2. Furthermore the bounce from the low of $20 is unfolding in an a, triangle b and c countertrend. Chances are that this countertrend has a little further to go before it is complete. Somewhere around $32/33 would be ideal in that it would close the gap and result in equality between waves a and c. But we are already close enough. This stock should be sold here.

     The diesel environmental problems are mostly behind Volkswagen. Perhaps Trumps 35% import duties are going to become a headwind for this company and others, or maybe car sales are going down across the board. We will see.

CCO, Cameco Corp. update

Hamilton

The usual then, Oct. 21, 2015 and now charts;

cco oct 22 2016 scco jan 13 2017

This is what we try to achieve in this blog. Provide you with actionable insights into a variety of stocks in order to help you become wealthy. It does not always work, sometimes it is partially correct and sometimes it is dead wrong, but nowhere else can you get such crisp insights. Of course you have to supply your own safety net by way of limiting your losses and letting your gains run.

This was a very good one. At the time we, tongue in cheek, suggested Trump might need some more of this stuff. Here we are just three or more months later and we are clearly on a collision course with Russia and China. In between we may even pulverize North Korea. In any event you are up about 70% in three months, not bad.

If you play bridge you do not normally want to play no trump. You will sort of have to get everything right the first time, particularly the sequence of events, to win. In politics most people seem to want to play no trump this time around, but everything still has to fall in place. Either way you will need more of this stuff. Going higher as per old (previous blog) chart below. $27 for starters.

cco oct 22 2016 l