So we got the 5th minor wave as expected to finish of wave C. As a result we have a perfectly symmetric structure within the blue circle shown above. I have absolutely no idea what that all means except that has a tendency to expand in time. My guess, and that is what it is, is that we go up to about $43 and then back down to somewhere in the order of $32
A week or so ago it looked like natural gas was, perhaps, bottoming. Earlier we recommended ECA, albeit tentatively, as a buy simple because of the upside potential (see earlier blogs). Here are the charts;
Back in December it was still possible that the wedge structure that was still unfolding could have taken the stock to as low as $15. It did not do that and stopped in the $17+ range. Since then it has been a rollercoaster , most probable a wave 1 up followed by a (very normal) deep wave 2, which means that we are presently in 3. The alternative would be a corrective a-b-c rebound than must , in any case, go to $22 (wedges are almost always fully retraced). Given the clear count this alternative is not at all probable. Considering that this entire C wave started at $34 and ended roughly at $17 it would not be surprising if the first bull-leg up would travel at least 38% of that which is $6.50 which would take the stock to $24. A very common next target is wave 4 of 3 (a triangle) which would take the stock to $26.
If there is a slight pull-back Monday morning this is an excellent buy for a gain of 10 to 20% with very little risk.
Kinross is another “favourite” stock that has not worked as a calamity hedge and or inflation hedge. It is now trading well below the levels it was at prior to the 2008 financial debacle. During that year, by the way, the stock lost 85% of it’s value despite the implosion of the US financial infrastructure. Now the Europeans are doing their utmost best to upstage the Americans by making their own, arguable, much bigger mess. So far the stock is down roughly 50% , sort of replicating the earlier experience and yet it is impossible to find more than half a handful of “analysts” that are not absolutely sure that more gold stocks are what is needed.
From an EW perspective, the 50% was well within the range of reasonable expectations, wave 4 is just a little higher and 50/62% is a perfectly normal retracement, regardless of whether one looks at the entire sequence as a single bull move, or starts anew in 2008. In fact in the former case the normal target would be wave 4 of previous degree, in this case at $2.50 or so! Should we trade below about $11 the idea that we are only in a wave 4 with 5 still to come will have to be rejected due to overlap. Should the stock ultimately drop in proportion to the 2008 situation in response to what is going on in Europe it would end up at about $3. Unthinkable given the present mindset which is exactly why it might happen. First we should get a bounce.
The TSX is at 12206, the chart is 15 minutes delayed. A little higher perhaps to 12230 and the downtrend could resume. Rather than a triangle we could be looking at a “flat” a-b-c. We would soon be completing the c.