We have urged people to but this ETF as a hedge if they hold stock. But after the lows in early April (where the HXD was the precise inverse of the HXU) we were a little but more excited about this ETF, even calling it top-pick. From an EW point of view these wiggles are very difficult to discern and count. A wild guess would be a series of 1-2,1-2s . This one could go a long way considering that it was as high as $40+.
This stock was always interesting as it could serve as a barometer for our market, given it’s exposure to the equity markets, interest rates etc. Late last year we still entertained the possibility of at least a $5 rebound from the lows then of about $11. We got the $5 but the stock simple did not do what it should if the market was O.K. Unequivocally we recommended getting out of the stock, and perhaps the market in its entirety on March the 6th (the blog is under “canary” on this website because of the dead bird picture). Here is Manu today;
Often it is more important to observe what a stock does NOT do, than what it does do. The expectation, or at least a probability of the stock doing an A-B-C as shown in red, was reasonable. But in early March the stock just would not above a narrow range, a dead give-away that something was wrong, so we advised to get out. (by the way, if your broker does not keep track of stocks bought for you , perhaps you should get a different one!).
We are now at $14 and would have given back any gains from$11. As mentioned then this could deteriorate rapidly.
July 12 I commented that this stock should not trade above $75, here is the chart (and the entire blog is available);
The $75 was where the upper trend line resided for the 5th wave up. It is also close for the trend-line of the whole thing. This is what happens when you get there;
In just a matter of days it loses $9. First stop is at $60.
On July the 16th it was our opinion that this stock would not exceed $55, it was only a few dollars away from that. So far it is down $14 from the high of $54+, or about 26%.
To some this might come as a surprise, it shouldn’t. This invariable happens when stocks that were previously shunned and then become darlings go meteoric. Even more so when the largest house in Canada puts it in the top-pick / focus-list category. This ensures that 1400 brokers and quite a number of funds and the even larger number of copy-cat funds are loaded up on the stuff. Nothing needs to go wrong with the stock but at some point the air-pocket will be hit. This one is going lower.