GPS, Gap Inc.

Hamilton

gps aug 15 2012gps aug 15 s 2012

Perhaps this stock will go to $100 or higher, but if you are a prudent investor you would sell now. Here are a few good reasons;

a. The stock is trading at a p/e of about 19.9, well above the norm of ,say, 15 in good times. That makes the stock overvalued by about $7, or so.

b.The stock just double topped, or is about to do so. This level serves as a magnet but once it is reached it often exhausts the stamina. It is almost always a good idea to stand aside at such a point.

c. From the lows of 2002 the stock has traced out a ten year long A-B-C, a corrective move that signals that the main trend is still down and should, some day, result in a new low. This is true even if the stock exceeds the high of 2001. The large B-wave would simple become irregular which is fairly common in a “flat”.

d. The last leg up from the, give or take, $15 low, comes after a very clear a-b-c (wave 4) and subdivides , equally clearly in 5 waves. The next move, should therefore be a drop to at least $25 (4th wave of previous degree AND a 50% retracement of last years action.

e. The RSI  (80) and MACD (1.78) both strongly suggest that a reversal is right around the corner.

f. The stock is trading about $10 above it’s 200-day moving average, a gap not seen for a long time.

g. Sales, to focus on one metric only, increased by about 5% overall y.o.y which hardly warrants a doubling in the stock price. Neither does the recent increase in the dividend.

 

For about $3.70 you can buy an at-the-money ($35 strike) put option going out to March 2013. Given the volatility of this stock chances are that you would do well either as a hedge or an outright short.

BGM, Barkerville Gold Mines update

Hamilton

 

bgm aug 2012

 

BCSC Issues Cease Trade Order for Barkerville

Wednesday August 15, 2012, 11:47am PDT

Barkerville Gold Mines Ltd. (TSXV:BGM) announced that after filing a technical report that does not meet NI 43-101 requirements, it received a cease trade order from the British Columbia Securities Commission that is effective from August 14.

As quoted in the press release:

The Company is advised that the cease trade order will remain in place until the Company files a technical report acceptable to the BCSC and addresses all technical disclosure concerns. The Company is working diligently to address the BCSC’s concerns and will file a revised technical report for the BCSC to review as soon as possible.

Our target was 15 cents, who knows what will happen next.

DE, John Deere

Hamilton

de aug 2012

Our overall expectation was and is that this stock will , once again, trade below the $30 lows of the great recession. They reported today and growth at about 15% y.o.y was pretty impressive if you ask me , but the market did not like the top line etc. etc. Also these guys are in crop insurance, not in a big way but certainly not at a great time. Memories of GE trying their hand at banking are still fresh. In any case they took the stock down 6+% so if you just bought it you are not happy. I suspect you will soon be even less happy

The first leg down, after the B-wave, took the stock down about $40 in a fairly clear 5-wave sequence, or is it 3 waves? Whatever. All action thereafter has been sideways, pretty well for a whole year now. All legs during this time are without a doubt 3-wave affaires. If this continues it will start looking suspiciously much like a triangle, meaning that it must be either a B-wave or a 4th. As this entire leg down from $97.5 is supposed to be a large C wave, the only option is to classify this as a 4th wave. A sharp thrust down could start now, that is it might already have started, or this triangle still needs to finish d and then e before we get the “thrust”.  We would definitely get out and stand aside. The chart below may be more convincing:

DE aug 2012 b

Buy low , sell high is the advice that should never be ignored. There are obviously times when buying high and selling higher works just as well but why handicap yourself. Clearly there cannot be any doubt that this stock is closer to a high than a low, in fact a move down to $30 would be a normal regression to the mean.

MON Monsanto

Hamilton

mon aug 2012 bmon aug 2012

A sell. This company makes all sorts of wonderful things like Roundup, Agent Orange and a lot of “engineered” seeds, such as draught resistant corn. On that basis it should , perhaps, be a buy but the chart points in the other direction. There is a very nice wedge, complete as is, which must be either a 5th wave or a C. In this case a C is the only possibility so we will go with that.