POT, and the B-wave.

Hamilton

Potash, and for that matter all the other fertilizer companies like MOS and AGU, all have B-waves, and in the case of Potash, an exceptionally clear one. Here is the chart once again.

POT b-wave

That this should be sold, at $160, was fairly clear some half year ago. The green “trapeze” ,if I remember my trigonometry, tells you precisely where the C wave travels the same (vertical) distance as the A wave. However C waves ALWAYS have to be 5-waves themselves which was not yet the case then. Furthermore a 50% or 61.8% had not been reached yet. So the better symmetry point was the next one (the stock was late but only a single dollar off the 61.8% target of $174 (the high was $173). Notice that the RSI and MACD turned a long time ago and the last few weeks the stock was propelled by upgrades, recommendations, Mosaids spin-off from Cargill and a whole slew of other noise.

By the way, if this is a B-wave, the stock will trade below $90 soon. Time will tell. A mistake that can easily be made, and I did on AGU, is that because the A wave within the B wave does not need to have 5 subdivisions as does the C wave, it is possible to be too early. The correction in Potash has already lasted 2 years so I do not think that applies now.

SNC , CRB (Jeffries), AGU , RDS.a and the B-Wave.

Hamilton

In EW terms the B-wave is normally the mid-wave in an A-B-C, correction, (by definition 3-waves). They tend to have an inordinate amount of symmetry and seem to ignore all fundamental information being almost oblivious to the rest of the world. There are 2 basic problems with the B-wave. First of all what may be 3 waves now can always develop further into 5 –waves and thereby stops being a B-wave. Next they can, and often do, rise above the origin of the preceding A wave which, intuitively, seems to make no sense. Yet it happens like clockwork and sometimes with a margin of about 30%. Despite this , it still is a B-wave. Here are 4 examples (there are literally dozens of them right now).

snc jan 2011 CRB jan 2011

and AGU.

AGU jan 2011 b-wave RD jan 2011 2

Typically the B-wave will retrace 50% to 62% in most cases, sometimes more and , if it gets that far, it frequently double tops, as in SNC above. The symmetry is nearly always present for reasons I do not understand, markets just love symmetry. In most cases that means that waves c and a in the B wave are equal (as vectors). This is pretty much the case with all four examples. In some cases the symmetry goes further and all 3 sub-divisions in the B-wave are vector equal, as, again, is the case with SNC. Anytime you observe this symmetry it pays to be very careful as once the B wave is complete, it is right back down often to below the starting point. If by some oddity the top should occur at a rather precise Fibonacci number (61.8) as for instance with the Canadian dollar in Oct. of 2001 or 2002 and now with SNC, I would get out altogether.

ABX, G, FVI gold stocks big and small

Hamilton

abx jan 20 2011 g jan20 2011

Both these large cap. gold stocks developed rising wedges/flags, pennants, contracting triangles in EW speak or whatever you want to call it. More often than not these structures are erased in their entirety.Roughly that would take ABX down to $36 and G to $35. That is not all of it as, depending on how we get there, 3-waves as shown in the ABX chart, or 5-waves as in the G chart, these stocks COULD drop a lot further. Notice that on both these stocks the RSI and MACD were ringing the proverbial bell on the floor. Goldcorp rang the bell even louder having failed 5 times to rise measurable above it’s previous peak.

Small gold stocks have not done much better recently, see for instance ZJG which is a sort of small cap.index. Recently, November last year, right at the top, we pointed to FVI for the simple reason that it is called Fortuna and all though we do not speak Spanish ,we suspect that it translates , more or less as fortune. Of course it does not say which one – the one you are going to make or the one you are going to lose. Here is the (short-term) chart;

FVI jan 2011

We are trying to keep an open mind with regard to the count. The one used above is by no means the only one possible so we concede that it,and the conclusions drawn from it, may be dead wrong. On the other hand there are a few good reasons to assume it might be correct. For one thing , the upper-trend line is respected perfectly by each and every high in the stock, of which there are five or six. Also the 5th wave, which is the extended one, is pretty close to being equal to waves 1 to 3 combined, again a common occurrence, especially where commodities and/or commodity based stocks  are concerned. Furthermore the RSI and MACD started rolling over about half a year ago. If correct $2,50/ $2,00 are consistent with this count, which if you own it from the highs would mean the loss of , at least, half your fortune.

RDS.A , Royal Dutch again

Hamilton

rd jan 2011 RD jan 2011 2

There is no double Dutch here, just straight talk and it ain’t good. This thing is cooked. A clear 5 wave up over a generation , then a 50% tumble followed by a very clear a-b-c.  As always there could be alternatives but for now , one should be very careful.