L, Loblaws

Hamilton

L 2011l l 2011 s

This is a grocery store  stock that got killed a few years ago. It lost 2/3 of its value and dropped into the level of the 4th wave of 3 and then some. The drop is a perfectly symmetric zig-zag, 5-3-5 structure . By all standards this very likely means that the entire “correction” is complete. Even if it is not , one would expect an initial rebound back to the wave b level of the correction at about $55, and possible much higher thereafter. From the present $39 that is a gain of about 40%. In this scenario the stock should not trade below about $37 as this would cause overlap, so $2 risked to get $16, an acceptable risk/reward ratio.

The Canadian Banks.

Hamilton

First a chart of just about every single one of them;

RY banks BNS banks

cm banks bmo banks

na banks hcg banks

cwb banks  LB banks

TD 2011

From top to bottom we have RY, which made a new high and then dropped 10% or so, BNS that not only made a new high but stayed up there, CM (CIBC) that seems to be groping in the dark, BMO, middle of the road, NA National, HCG Home Capital Group (see comments elsewhere) the best of the lot and , ironically, the only sub-prime lender, CWB Canadian Western Bank they finance anything that belches diesel smoke and is yellow, the Laurentian Bank and last the TD.

Notice that despite some , sometimes large, deviations most have done more or les the same thing. All had 5 waves up, then a big drop, and then an attempt to a new high. Some failed others did not. The TD is in the middle of the pack with a simple double top.

All are sells! These banks operate as a cartel, with intended or unintended collusion all over the place, with rotating price setting etc. etc. This is the same all over the world but Canada does it best. They have a huge lobby in Ottawa and usually get what they want (with the notable exception of further mergers). If they want private wealth management to stay that way, as opposed to broadening the CPP, they will get that.

There is one big problem with this. Ultimately ,with globalization , the system will have to be opened to competition when Canadians tire of paying twice as much as the next guy. They already have just about everything. In the mid eighties they took over mortgage lending from the trust companies and now control about 80% of that. A few years later they took over all the  major investment dealers and now control much of that. Gradually the independent mutual fund firms are also taken over and now they control the bulk of that. They have made sizeable gains in insurance and are gaining momentum. There is precious little left other than leasing and travel. So where is the growth going to come from?

    At the same time new rules  (Basel 3, Volcker, Capital requirements etc.etc.) and regulations are crimping their ability to move beyond the straight and narrow. Not that they ever did much of that but even so they will be doing less of it in the future.  Soon, hopefully, they will lose the absolutely enormous benefit bestowed upon them by ridiculously low rates. This is a mature industry, and the next 20 years are not likely to resemble the last. The only thing they still have going for them is the perception that they are safe blue chips. Any broker who is not sure what to do buys bank stock and this artificially keeps a bid under the stocks, but from the charts it is abundantly clear that this can change very fast as in 2008, maybe it will again.

   From a buy low sell high standpoint , none of the above banks are a buy today.

RCI.B , Rogers Communications.

Hamilton

I have been dead wrong on this one previously (the wedge just kept going!). Now things appear to be a lot clearer. Here are the charts.

rci.b jan 2011 RCI.B 2011 s

 

Back in 2003 this stock briefly flirted with bankruptcy; that is where we start the chart but there is a wild history before that.  They did not go bust, instead, ironically perhaps, they occupied the offices of Confederation Life, that did go down .

After the top at $50 the stock starts dropping well before the market as a whole, losing about 50% to $25. It then trades back up a precise 62% and starts falling again. It never reached the “logical” point of about $20 (4th of previous degree and 62%). It may well do exactly that in the near future after first trading to about $37/8 as it completes wave 2 of C.

PH , Parker Hannifin

Hamilton

This company is in the business of making “motion and control” technologies. Hydraulic valves, pistons, hoses and a myriad of other things. You cannot make a John Deere or Cat. without them. I know them well from a previous life in consulting with Bank of America. They are a real American company, whatever that means. Here are the charts.

ph 2011 l ph 2011 s

On the left you have the 30+ year chart. The trend-lines drawn are simple their to show the degree of freedom that the stock has.  It is a little like a cage that defines the normal boundaries . (by the way, the lines would be about parallel of a semi-log chart was used.). Again we have the 5-waves up, just like all the others. Also the $-range is very similar, nearly always $0/5 to $70/90 or so. Then this thing drops like a stone only to make a V-turn and rise to new highs. This is a B-wave, often caused by momentum players who have adopted it and who believe in the greater fool theory. It always ends unpleasantly , when it becomes clear that there is no greater fool anymore, you are it.

   At about $96/$97 the stock will hit the upper trend-line AND c+a within the B-wave. Time to get off this rollercoaster.