BNS, update

Then, Sept. 2014, and now charts, as usual;

bns may 28 2014 bbns 23 sept 2016

Precisely two years ago when the stock was trading at about $70, our expectation was that it would trade to the other side of the channel in which it had been for most of our (working) lives. That blog is still available for you to see. The rational for this expectation, at least in EW terms, was that we had, or were about to complete a very large and irregular B wave. In reality the stock traded from a slightly higher level of about $75 down to $50, a drop of 30%! It failed to reach the other side by only a few dollars, but it did overlap with the all-time orthodox high of $55 set in 2007, potentially a very bad sign.

     The B wave is on the border of what might be considered acceptable for the size of a B wave, i.e. 30% higher than the previous top. This leaves open the possibility that it wasn’t a B wave at all. Instead it could have been a 5th wave. Either way the next big move should take the stock down to about $25, alternatively the low of wave A, or the low of the 4th wave of previous degree. Depending on that the wave C down in the former case should start its third wave down any moment having finished wave 2, or, in the latter case it has just completed a wave b to be followed by a 5-wave (smaller) wave c.

For comparison purposes we show HCG and CWB below. These are small Canadian banks and consequently perhaps a bit more volatile. We expected HCG to go a little lower before closing the gap. It did not but the it did close the gap. But now we are close to the lows for both of these banks supporting the notion that lower levels for all banks may be in the cards,

hcg sept 23 2016cwb sept 23 2016

BNS, update

Then, Sept. 2014, and now charts, as usual;

bns may 28 2014 bbns 23 sept 2016

Precisely two years ago when the stock was trading at about $70, our expectation was that it would trade to the other side of the channel in which it had been for most of our (working) lives. That blog is still available for you to see. The rational for this expectation, at least in EW terms, was that we had, or were about to complete a very large and irregular B wave. In reality the stock traded from a slightly higher level of about $75 down to $50, a drop of 30%! It failed to reach the other side by only a few dollars, but it did overlap with the all-time orthodox high of $55 set in 2007, potentially a very bad sign.

     The B wave is on the border of what might be considered acceptable for the size of a B wave, i.e. 30% higher than the previous top. This leaves open the possibility that it wasn’t a B wave at all. Instead it could have been a 5th wave. Either way the next big move should take the stock down to about $25, alternatively the low of wave A, or the low of the 4th wave of previous degree. Depending on that the wave C down in the former case should start its third wave down any moment having finished wave 2, or, in the latter case it has just completed a wave b to be followed by a 5-wave (smaller) wave c.

For comparison purposes we show HCG and CWB below. These are small Canadian banks and consequently perhaps a bit more volatile. We expected HCG to go a little lower before closing the gap. It did not but the it did close the gap. But now we are close to the lows for both of these banks supporting the notion that lower levels for all banks may be in the cards,

hcg sept 23 2016cwb sept 23 2016

Canadian Banks.

So now that we have a prototype how does this fit with the Canadian Banks? First a bit more about B-waves. They can be regular, or irregular which simple means that they climb above the starting point of the A wave. Their are no hard and fast rules but I believe it is more or less accepted that irregular B-waves should not exceed the top of the A-wave by more than about 30 t0 35%. Here is an example, CWB, Canadian Western Bank, they pride themselves on financing anything that is yellow (think CAT) and belches diesel smoke;

cwb june 29 2015

You can clearly see the B-wave. This one just happens to be at the edge of the 30 to 35% or so limit, but in every other respect it is perfectly clear. Target $8 or lower. If that sounds ridiculous than keep in mind that it last traded there just 10 years ago.

An error crept into the chart, the 4th of previous degree line should be lower, at $6!

The next two big banks that have the clearest B-waves are CIBC, CM and BMO;

CM june 29 2015bmo june 29 2015

Commerce is of particular interest as it managed to double top, the last big bank to do so much to the surprise of many that work there and thought they would never see the day. In any event, nice B-waves and terrible targets. BNS and National Bank have B-waves that are borderline but still acceptable given the channels they are in;

bns june 29 2015Na june 29 2015

Royal appears to follow the triangle scenario a little better and TD is unclear, perhaps because the Canada Trust part changed the company to such an extent that it simple cannot be looked at on a continues basis;

ry june 29 2015td june 29 2015

Royal sticks to it’s channel quite nicely. It would fit either of the two scenarios equally well, in fact it probably fallows the path of JP Morgan the best despite the fact that it has outperformed it by a long shot. TD must fall into the B-wave scenario given the otherwise not acceptable overlap. Putting it all together, including the insurance companies we have the XFN, the TSX capped financial ETF;

XFN june 29 2015

There can be no question that this is a B-wave, AND that it is complete. This chart has less time on it as the ETF did not exist prior to 2002. Fortunately, we can still see where the wave 4 of previous degree, that is on the way up, is. $11 and that is where we should go under EW rules and guidelines.

We have left out HCG, Home Capital Group. It is by far the best performer and fundamentally runs a sound business model. It does not fit easily in either scenario but with a little imagination we can make the triangle – distorted though it may seem to be – work quite well. The top is even perfectly above the apex! Here is that chart;

HCG june 29 2015

The conclusion must be that you do not want to be in the financials, period. By the way, this negative outlook is in no way predicated on what happens in Greece. If the timing seems to coincide it would be just another one of those fallacies, after this, therefore because of this.

BNS, Bank of Nova Scotia, update

bns may 28 2014 bbns may 28 2014 s

We did not think that BNS would trade beyond $61 for years but here we are close to $70. The precise EW count eludes us, we show two in the big chart, but there is also a third possibility with a large B-wave. For the moment we are more interested in the channel both big and small. For twenty five years this stock has meandered from the right bank to the left bank and back again, only once seriously leaping out of the channel. Again we hit the left bank and consequently we fully expect a return to the right bank and perhaps a lot more.