BHP is following our script nicely, having dropped another $20 or so since our last blog when it was still around $80. It has announced major cutbacks on its capital outlays which were expected to be about $80 bln. for the next 5 years. To assuage any concerns investors might have it reassured the world that it still loves coal and copper, presumable just a little less. In any event this stock should fall to about $55, perhaps a lot further.
Ten days ago we showed this stock using both an arithmetic and semi-log scale. We leaned towards the semi-log to determine the best entry point. As is invariable the case in these markets if there are two to choose from, you will pick the wrong one. The “target” for the arithmetic chart was about $9.60 (see that blog). Give or take a few cents we are at that target. The RSI is clearly oversold and the MACD turned 4 months ago. Perhaps this is it. If you take out the B-wave triangle – it certainly is not a text-book example – wave C would have a clear 5 waves down as well as the equality with A.
Boardwalk is one of the original real estate investment trusts and will be able to continue operating as such, unlike the other un-s that have had to change their legal structure. We would sell this one now. Three good reasons. One, real estate as a rental is essentially always worth X divided by the inverse of the prevailing interest rates. Roughly speaking property is worth 3 x as much when interest rates are at 4% as compared to 12%. If rates were to go up, the value drops accordingly. Two, we cannot help but notice that this stock is closing in on that wonderful Fibonacci number of $61.8, just a dollar left to go. Third, the trend-line has been exceeded and the next line is not that far above. Then , of course, the pattern suggest a completion of a 5 –wave sequence even if there is a problematic overlap. And, both RSI and MACD are ringing that proverbial bell when it is time to exit.
For various reasons we did not expect this stock to double-top at around $20, hence this particular count that is not 5-waves from the bottom, the last leg to $18 is a B-wave. All that is essentially academic as in both cases a 5 wave down sequence should follow, the top as shown is the”orthodox” top of the retracement. It looks like there was a series of 1-2s at the start and therefore we would expect the same at the bottom. Things can happen quickly as, so far at least, the drop has only lasted 3 months. It is possible that we complete the first 4-5 in the next month or so and take the stock to $9 or below. For the big picture see chart in previous blog repeated below;
Ultimately the target could be the wave 4 low in 2002/3 which on this semi-log chart is a little difficult to guess but is around $1.