TRE, Sino Forest. Monkey see, monkey do!

Hamilton

TRE July 4 2011

So Muddy Waters killed the stock and Wellington has reignited it. Neither is exactly true but it does show how totally mindless investing is. I recommended this stock a fortnight ago (that is 14 days!) at , say $3, you could have bought it their or even 40 cents or so lower. Today you can sell it for $4.50 for a gain of at least 50%, which,  by the way, is 1250% per annum not including compounding. The stock may go higher yet but right now the correction from the lows looks a lot like an a-b-c. As mentioned in my previous blog, this could – repeat, could – simple be a fourth wave. Time will tell but if it is, a 5th down should follow and you can do the whole thing again.

CAT

Hamilton

cat june 2011 CAT june 30 2011

Earlier this month we anticipated that Cat. might peak (see chart on left). It did and fell $22 during the month. More importantly the pattern is easily counted as a wave 1 , followed by a corrective wave 2, which may, or may not be quite over. Next big move should be down inthe order of $36 and possible more.

EMP.A, Empire Co, Sobeys

Hamilton

EMP.A

Sobeys is following the script precisely. This should continue if the count is correct. Today the dividend is increased and the news is generally speaking good but not outstanding. Nevertheless the next move should be down in a 3d wave. It is depicted without regard to magnitude and is simple meant to show the structure that should be anticipated.

FSLR, First Solar Inc.

Hamilton

FSLR

This chart of First Solar covers only 4 years. From $20 to $320 and then losing 2/3 of that. for the past 2 years it has been consolidating, going nowhere. This looks a lot like a triangle and if it is we will know in a few months. This would favor the downside and indeed most consolidation pattern are resolved in the direction that the stock was moving in before the consolidation started, in this case down.

The fundamentals may even support the down side. As we know, all governments around the world , from Germany to Canada have introduced programs to essentially subsidies these new technologies. In most cases the price they have offered to buy electricity is a multiple of the cost and as a result the programs have been extremely successful. Every second farmer in Ontario has these big , sun facing screens in their fields (cost about $60,000). Very profitable for them if they receive a feed-in rate of 80cts/kwh, when electricity goes for 5/8cts/kwh. Rather than acknowledge the stupidity of these policies, they have simple stopped making the connections. This will dampen demand dramatically in the very near future. These subsidies are not sustainable.

If you are long this stock just keep it but out in a stop at, say , $100. At $165 this one should be shorted again using a buy stop at $180. Good luck.