CIX, CI Financial

Hamilton

cix sept 2013

We have been wrong on this once before, but that was then, three years ago and this is now. We would sell the stock immediately, if for no other reason than that it is about to double top, always a good place to step aside for a little while. This wealth manager is, of course, 36% owned by the Bank of Nova Scotia. In the background there is always talk that they may want to own all of it. We have no idea and in any event that would be a fundamental issue which really is not our cup of tea anyway.

Elliot, the guy that summarized all the different patterns observed – there are only 13 of them – never endorsed the existence of “running” triangles. However other practitioners have subsequently found pragmatic reasons to add the odd “new” pattern. To me what matters is that it works, that we will soon find out. Assuming this thing exists than the above chart is that of an A-B-C wave B where the  middle B is such a running triangle. If so you do not want to own this stock any longer.

JCP, update

Hamilton

jcp sept 8 2013

Our call for JC Penney to move up rapidly is, of course, also based on the “diagonal” pattern. As always it is an ending pattern, in this case a wave 5 of the leg down from $42.5. The base is at $30. This particular diagonal is also near perfect. There may ,or may not, be a triangle within the diagonal but other than changing the positions of the various a-b-c’s, it is not , material to the conclusion. We are up about $2 from the lows. A break now of the upper trend line will propel this stock much higher. If not it will happen anyway but just a bit later. Notice, by the way, that the RSI can be very helpful in determining where the individual legs start and end. Often the low in the RSI precedes the the low point of that particular leg so it gives an advance warning of a coming turn. In this instance it might be possible to argue that the “diagonal” is not just the 5th wave of this structure, but that it actually starts at the $42,5 level as per the chart below;

jcp sept 8 2013 2

The reason we reject this possibility, at least for starters, is that it does not look as good and also because we have to weigh all the possibilities, that is the potential gain against the risk of missing the boat entirely. A break now of the trend line will , for all intents and purposes , negate this possibility.

10 year US Treasury note, TLT

Hamilton

US10YT sept 13 201210 year treasury note sept 2013

Above is another very good example of the “diagonal contracting triangle” or wedge. The charts are the then and now depictions of the US 10 year note in yield terms. Then was 18 of Sept. 2012 and now is the 8th of Sept 2013, so they are basically a year apart. The wedge is very visible and the confidence of rates going up, despite the newly launched QE infinity and all the other hoepla from the Fed, was accordingly very high. Now a year later we are at 3% coming from 1.38% a double already and we have yet to reach the initial (minimum) target of 4% which represents the “base” of the wedge. See previous blogs under 10 year or interest rates.

The same wedge can be observed on the TLT, the long bond ETF. This chart is on a price basis, not yield. Consequently the wedge goes up rather than down. Interestingly one of the main reasons for the QE’s was to make mortgages cheap to help the housing market. How well that worked is painfully obvious from the chart. A 30 point drop on the price of the long bond is about equivalent to a 25% loss on your investment and we are not even close to the initial target of about 87.

tlt sept 2013

HXD update

Hamilton

hxd SEPT 9 2013 bhxd sept 2013 s

I would prefer not to talk about this particular stock were it not that it appears to provide a great entry point soon. The chart on the left is just to make clear where we are today and the scale of what might still be possible. This particular instrument is, of course, the inverse 2x leveraged  Horizons Betapro  TSX index ETF. It is presently tracing out a very clear and articulate “contracting diagonal triangle” a.k.a. a wedge. All five legs in this structure are sub dividable in threes. There is overlap between 2 and 4. There is alternation between 2 and 4. By the time it is complete it will be less than a single dollar lower than it was about three years ago, typical of the coming end of the drop from >$40. Using a more detailed chart (see below), I make the low $6.95, but remember that the price does not have to go right to the line and may well stop before ever getting there.

HXD sept 9 2013 vs

The RSI typically drops below the oversold 30 level at , or just before, reaching such extremes. The minimum target for this trade is at $12.50 but the ultimate potential is for it to go much higher. On a scale of 1 to 10 in terms of confidence in this trade, I would put it at 9.5. You can enlarge the chart by clicking on it and increasing your own confidence level. Also I have added an example of a similar structure that occurred with BBVA, Banco Bilbao Viscaya, the one in purple . In that case the low was actually made slightly below the lower trendline and there was no alternation (welcome but not required). The stock did double almost immediately, see that blog. There are dozens of other examples, YUM being the most recent one.

bbva june 2012