K , Kellogg

Hamilton

k b k s

Kellogg is in the process of double topping. It may already have made it’s high, or it may do so in the very near future. At best it could add a dollar or two to it’s value (to $58 ). In the past 5 years it may have spent 4/6 months all told at these lofty levels. My bet is that the next big move is down.

GIS

General Mills is in the same business, that is they put a little wheat and a lot of air in boxes of cornflakes and charge a fortune. The count I put on this chart is, obviously, incorrect. Given the enormous overlap this entire pattern would have to be an expanding diagonal (wedge), or wave 5 is not wave 5 but B. Whatever.  What is more interesting is that the upper trend-line has been reached 4 times already and each time the stock gains less and less. This one is done as well.

LXK , Lexmark

Hamilton

lxk b

I could not get a longer chart to see what this stock did during the tech. bubble, so I am simple assuming that the near $100 high shown on this chart is THE high (by the way, another fitting example of the Mnt. Everest syndrome). From that top the stock corrected losing 77% of it’s value and did so a a very clear zig-zag, actually an a-b-c X a-b-c , in which the X retraces about 62 % of the first a-b-c. These patterns can repeat 3 times which would lead to an a-b-c X a-b-c Y a-b-c. More than 3 is not possible (stated more correctly, none have ever been found!) In this particular case it is highly unlikely , but not entirely impossible, that a third a-b-c is forthcoming . That would take the stock to $0 or below. So I assume that the $15 low is THE low. If so it follows that a new bull market started at that point.

lxks

Notice that the low is not in synch the general market, it occurs 4 months later. If we are in a new bull we should see 5-waves up to start the process. This is wave 1 up of the new bull. Then we should get a (deep) correction for wave 2. So far we have an a-b-c down, but the c is probable not yet complete. An ideal target would be around $25 where c=a, 5-waves for c would be complete and wave 2 would have retraced about 62%. It does not have to do that but it might. If it does it should be a buy.

By the way, this computer hardware manufacturer trades at a P/E of about 7.

CWT.un, Calloway Real Estate Investment Trust

Hamilton

CWT.un

Calloway trades at a P/E of about 85, according to Bigcharts, yet it earns slightly more than 6% in distributions. No idea how well the fundamentals stack up , but IMO this one is pretty well priced to perfection, just as it was in ‘07.

EW wise there is some ambiguity in that the drop in ‘07/’09 could either be a 5-wave move or an A-B-C. But, either way the next significant move should be down by about $10 even in the optimistic scenario. There does not appear to be any real immediate upside all though some might argue that double-topping is just around the corner. In the highly unlikely situation that this actually happens only $4 would be added to the value of the stock, ergo the risk/reward ratio is very much against you. Sell or use a tight stop.

R Romarco Minerals.

Hamilton

R june 4 2011

R took it’s time to get to the ideal target of $1.50 (actually it is $1.30 as that is the base of the wedge) . If you did already buy it there is no problem but if you have not this is again a good time. Look for $2.50 before the year is out , perhaps higher.