On the 24th of April we recommended buying this stock. It hit a low that day of $2.85. The next day it went even lower to $2.83 but now it is up by 40+ cents so perhaps it has turned. Wave 4 of previous degree is always the first target, either of a corrective rebound or a new bull market. In this case a triangle of minor degree with its highest point at about $5.50.
Colgate went to $100.80 in a “throw-over”, that is exceeding the upper trend line. We never expected this stock to trade much above $92 and certainly did not expect it to take so long. However we do not see any reason to change the outlook. This structure is, with very little doubt , a “diagonal” , the only structure that allows for overlap. Another characteristic is that the third wave is never the shortest! In rough numbers wave 1 was $40, wave 3 $30 and so far wave 5 is about $26 at the $101 level, ergo it can only go an additional $4 if this analysis is correct.
The only plausible but very unlikely alternative would be a count with a series of 1-2s at the beginning and 4-5s now. Even then the stock would be topping but the above rigid math would not necessarily hold. Jan 2013 options are now as follows;
Suppose you bought the 100 strike Jan 2013 put. It would cost $5.60. Should the stock drop down just to the lower trend-line (it should go much further) your option would be worth about $35.85 (where the $130 strike now is). Lower strikes give higher returns but with a lower chance. Same thing for shorter terms.
At around $70 we thought this one was getting a little pricey. Unless they have discovered some elixir than extends life itself we would suggest this is a sell. There are a few good reasons. There is, arguable a nice 5 wave move up from the lows in 2002 and from $70 onwards this one is climbing vertically. Waves 5 and 3 are about equal in length. The Mount Everest effect clearly played a role, the stocks high was at $99.56, can you get much closer to $100?? The p/e at $70 was already at 44x, today it is at 62.38X. This company is in the pharmacy benefit management business. The company was founded in 1993, started trading on the TSX in 1995 and went IPO in 2006 on Nasdaq.
If this call proves to be correct over time it should fall back to at least $40 and should do so in a matter of months!
We recommended this leveraged ETF on natural gas on April 18th when it was trading at about $8.50. This is about the most trend-persistent commodity for a very long time. What that means is basically that analysts, brokers and other connoisseurs who have absolutely no idea what they are talking about parrot each other and keep repeating the same mantra. When it was around $6 on the commodity this just had to be bought and there was only one single analyst (at Dain Rauscher) that I am aware of who wrote a very good report arguing that natural gas would go to about $4 and stay there for a long time. Going long the stuff too early has been extremely costly particularly for those that trade commodities without stops.
In any event sentiment has turned in a truly remarkable way and now we have the likes of Goldman Sachs and T. Boone Pickens firmly on the long side. It is all a bit too much. Here is the chart;
We do not care about the fundamentals. Natural gas is often a by product of oil and consequently it does not have its own demand and supply curves. Next it can not (yet) be moved around so it has a “regional” price. We look only at the EW patterns. Assuming this last leg down on HNU is a 5th wave, typically we should retrace back to about $14 as a minimum. Beyond that $23. In both cases at least a minimum of 3 waves up is required. Presently we are up about 29% and this ETF goes at twice the speed of the gas itself.