X Toronto Stock Exchange.

Hamilton

x feb 2011

The TSE does in six months what it took one hundred years to do. Everyday we are up 50/100 points no matter what the news. We have one Fed. member saying that we are pushing the envelope. another saying that we should seriously review QE2. China increases interest rates, now at about 6%-plus, but here in Canada we still believe the nonsense about our great banking system etc.etc. I will stick to the basics. This is a sell, period!

The stock looks to open today at around $42.60 up about 2 1/2dollars from yesterday’s close. The TSX will end up as a minority shareholder of the new company, clearly it is seen as the pig in the Ham & Eggs joint venture. There are lots and lots of regulatory issues that need to be dealt with and one can only wonder how they are going to assert that this is in the interest of Canada after the Potash nonsensical position. The OSC, which has no teeth will have to step aside for the English version, FSA. All of this can get very messy! Reported earnings for the quarter (came out this morning) were lower than expected and below last years by about 20% or so.

MCD, McDonalds

Hamilton

MCD 2011 feb mcd 2011feb2

McDonalds has a very interesting chart. Most stocks dropped from 2000 to 2003 and so did the hamburger chain. Than in 2008/9 most stocks dropped again,often by even more but MCD barely budged. Instead of dropping it formed a rather clear and distinct triangle, a consolidation pattern that almost guarantees further gains. These gains “normally”, but nothing is normal in these markets, equate to a level equal to the size of the mouth of the triangle, which is why we thought the stock was overdone at $70.

   As it happens the stock kept marching on and recently peaked at about $80, this is roughly 1.6X the triangle measure and about as far as they ever go. Once this , minor counter-trend rally is over (perhaps at $76 or so) this stock should be exited or sold.

NFLX, Netlik Inc.

Hamilton

Got this one wrong the first time (it was not a sell @ $156!) so here is another look.

nflx feb 2011 nflx data

The data on the right is from Bigcharts, if it is correct this is scary. Who says we are in a bear market? At $220 it has exceeded the meteoric rise of our own darling stock Nortel which never got higher than $124.55  Yield , there is none. P/E a very modest 74.27, even Japan did not get above 65. Short interest, I have never seen this before, a mere 21.48%.

The count on this thing might be 1-2 1-2-3-4-5 4-5 and just about complete once the upper trend-line is hit. This is obviously a short but I would not touch it other than with  put options. This is a momentum trade  if ever there was one, it will end in grief once the last “greater fool” leaves the stage. Ironically this is happening just as that other movie rental company is up against the wall.

HSE Husky Energy.

Hamilton

See our previous blog on August 26. In today’s Toronto Star,  Bill Carrigan an independent stock-market analyst, mentioned the stock as a buy in an article that was primarily about the use of stop-loss orders. I did not find the article very “actionable” as it left me with the feeling so now what. So here is my take on the matter.

HSE feb 2011 hse feb 20112

Here is the big chart , and the intermediate chart picture. I have inserted a count in both, but am not entirely convinced that either is perfectly correct, but we are not trying to be perfect, just very , very , plausible. Since last August things have worked out well, if slowly, but you are picking up a 4+% dividend along the way. In the mean time we have managed to break out of the “wedge” formation that we were in for a couple of years.  Here is a little more detail;

hse 2011 3

The break-out is clear enough, it is not too late to buy as it could have quite a way to go, so buy at the market but put in a stop-loss at about $26.50 (with a limit of $25). You do not want to see the stock re-enter the wedge represented by the downward sloping line over the tops of the wedge. You will be risking about $2 initially. If and when the stock moves up, you ratchet up the stop-loss but just like driving a car, don’t go bumper to bumper. Simple adjust to the purchase price and wait for things to go your way, the trend, after all is your friend and most of us are our own worst enemies!

So where do you sell, at $36 or a little lower. Doing that would net you about 33% plus one year carry at 4+% for a total of 37%. Along the way, of course , there is no harm in reformulating your strategy but remember that if you always make 40% you should do just fine. If you get  “married” to a stock you will inevitable lose money.

Just to see how plausible this trade is , a look at West Texas oil is worthwhile.

wtic hse

We do not like oil (for the moment, and perhaps longer than that, see elsewhere in this blog) so why like Husky. well, quite clearly HSE has been completely impervious to the price of oil, for the past two years oil was up and HSE down. This stock listens to a different drummer so this is not a great concern, for now. The discrepancy may have something to do with the ownership structure of the stock, which is fairly unique. By the way, there are a number of counts on this stock that are much more bullish than these.

You can click on these charts to enlarge them and move them around.