JNJ , update

Hamilton

jnj jan 2011    diagonal model

Here we have JNJ again. Like Colgate Palmolive, MMM and a few others this is a “blue chip” that has weathered the recent financial storms quite well , so far. It is also priced to perfection and having gone up in a clean 5-wave pattern, from 0 to $75, it has nowhere to go but down. The text-book (literally) model of the 5 wave sequence ending in a “diagonal” (read, wedge) is shown beside the chart. The wedge is invariable retraced in full.  Furthermore, a retracement to the 4th wave of precious degree, is normal and has the highest probability, that point is at $35 At around $29 we reach a 61% retracement of the  30+ year bull market, again a very likely event. This stock is a sell.

This is not to say that the stock is not good, that is not the argument. Stock prices simple fluctuate well above and well below what they should be worth. Good stocks may simple be sold because that is where the most money is to be had when in need.

For the sake of completeness, I have added Colgate Palmolive below. Remember that this stock may still have to go up marginally to complete the pattern. In all other respects it is a carbon copy. So is MMM. The charts can be enlarged by clicking on them, then they can be moved around to make comparisons easier.

CL simple

PPL , Pembina

Hamilton

Here is another pipeline/energy infrastructure type of company that has done well and is comparable in certain ways to TRP and the others. This one is fairly clear!

ppl2 ppl

On the Bigchart on the left a very clear 5 wave move up can be seen, even if it is not equally clear where wave 3 ended, but that does not change the analysis, fortunately. When 5 waves are complete in a single sequence the stock typically drops back to the level of the low point in wave 4, in this case $12. However, looking at the detailed chart it is possible to count this as a 5-wave sequence, as in a fifth wave, or as an A=B=C in a large B-wave. Either way the stock could have one more (small) move up if a triangle has been forming over the last 4 months. Keep in mind that the stock has already exceeded the upper parallel line and both the RSI and MACD have dropped sharply. A stop at $21 could limit the damage.

TRP, Trans Canada Pipelines.

Hamilton

TRP

This is Trans Canada Pipeline, a long time “blue chip” and favorite of risk adverse investors, until , of course, it betrayed them by doing what it had promised a multitude of times not to do – cut the dividend. In a fairly short period of time the stock was punished and traded down to about $9 (in 2000). There after people realized that this was not a tech stock but a utility, and the stock regained its composure and then some. From an EW point of view, both big drops on this chart appear to be zig-zags (down fast and only the briefest intermission). This suggest that they are of a different degree which favors the alternative count. Either way we were at a “generational” high in 2007 and have not move far away from that. Regression t0 the mean would suggest a further drop to at least $22 , which  conveniently happens to coincide with a 62% “normal” retracement.

trp 2 ipl.un

Short term it is hard to come up with a plausible count. But there appears to be either a triangle or a wedge right at the top which does suggest a top is near. It already reached $39, only a little shy of the all time high of $41. Both RSI and MACD are starting to point down. A stop at about $35 would be appropriate, should it manage to go up first I would sell at $40/41. A quick look at another infrastructure energy related stock, IPL.un suggest the stock is a little over valued at this time and may fall back to its 4th wave (chart on the right.

POT again.

Hamilton

POT jan 28 2011

Potash keeps fascinating. Everyday, ad nauseum , we here from our friends in Saskatchewan that this stock is worth much, much more. Just to help that notion the dividend is doubled, a stock-split 3 to 1 is announced and just about every other trick in the book is used. Completely without self interest of course ( the top dog is now close to 1 Billion for himself, and the premier is now a person rather than a nobody). You can listen all day to BNN or CNBC and literally everybody, without exception, knows that this thing is going up.

Malthus lived about two centuries ago. His claim to fame was his dire prediction that we would all starve because the World could not support a population that was then about 1/10 of what it is today. His arguments sounded quite plausible but so far it has not (yet?) happened. Now we are getting a slightly different version of the same argument, this time it is the Chinese  joining the west and wanting stakes on their BBQs. But;

Scotia coomm Potash comm

On the left is the Scotia all commodities price index, notice that it is nowhere near its highs and seems to be completing a b-wave correction which would mean that it could resume its drop to levels where it was for 10/20years before the peak of 2008. Notice also, on the right, that potash as a commodity reached a price close to $900 per unit, it is presently at a bit over $300 and has been there for quite some time.   Potash Corp is operated as a cartel, an oligopoly with POT as the lead dog with, I believe 40+% of World output. The name of the game is to restrict output in order to maximize the monopoly rents (like OPEC). As a consequence income is in direct relation to the market price. Two years ago $900 per ton equaled $240 per share, today $300 should equal about $80 or so. You are paying more than twice as much today. Not very sensible.