Pattern Recognition , Nikkei 225 and RIM

Hamilton

 

Nikkei 225 june 2011

RIM june 18 2011

These two charts are unrelated, the top one is that of the Nikkei 225 , an index , covering a period of 30 years or so. The bottom one is that of RIM, a single tech. stock, that , by the way, is reporting tonight.

I used to have an investment advisor sitting right next to me at WG. JP were his initial and he is now a frequent speaker on BNN. I would put two identical charts under his nose and ask if he could see the correlation. More often than not he couldn’t. From that I learned to understand that everything is truly in the eye of the beholder.

To get to the point, I think RIM may or may not drop another dollar or two but the next big move probable is up and quite a bit. The Nikkei has not completed the “diagonal” ( read wedge) yet and should soon drop. In the end both charts will look almost identical, unless you are JP.

Correlation , incidentally, does not, of course, imply any causal relationship! The common factor here is sentiment that has moved from euphoria to grinding despair.

WTIC West Texas

Hamilton

   wtic may31 2011

This chart is 3 weeks old. Many charts were warning that contrary to the consensus oil was going to go down, perhaps even a lot. Individual energy stocks were saying the same. Today,despite a very large drawdown of inventories the stuff dropped right on cue to form (the start) of the thrust down. Here is the chart;

WTIC.june 2011

This is most like the first $4 down, it should go a lot further.

HXD Horizons TSX 2X Down, Top pick !

Hamilton

HXD june 2011

Everyone that owns stock should own some of this stuff. Since hitting lows of around $7.80 in March and April the HXD has gradually worked its way up, a break-out if you wish, to the present level of $9.36, up about 20% against a market that is down about 10% so it tracks as advertised by 2 to 1. This is a great hedge!

Why hedge? Why not just sell the existing position? The answer is that your broker truly knows what he is doing and therefore his picks will outperform the market, so you want to keep them while you want to reduce your exposure to the market overall. Tax and commission considerations may play a role as well.