Often the best results are obtained when you observe the creature in it’s normal habitat, in this case pounds, shillings and pence. These charts , a 5 year and a one year, are from Bloomberg and include part of today’s trading. You may recall, now months ago, that we were anticipating a triangle together with the usual erratic swings up and down. Technically speaking we never actually got that, at least not when measured in US currency. However when measured in Sterling we got exactly that – we show just one but point out that a longer one is also a possibility – and at 1875p this morning we are about 75p away from the ideal triangle measure at roughly 1800p, which also happens to correspond with the low in that other triangle on the way up. The top, by the way ,was at 2599p.

In US currency, using the ADRs as a proxy for the stock, we do not have this triangle but we do appear to have a diagonal triangle, that is a wedge. One more brief low would complete this structure so we continue to recommend this as a buy. The potential is for about US$13, or 500p to the upside! That would, in our opinion, be wave B in a large A-B-C correction so we are not recommending that you get married to the stock. Just in case you try to figure out the exchange rate and conclude that it is wrong, keep in mind that the ADR represents 2 shares and not one!

As we get closer it becomes easier to calibrate this stock. $56 seems to be the best spot to buy. The yield is 6.40% now so by the time it gets there that should be, at least, 6.6% At that rate your money doubles in less than 11 years. By  that time  Christine Lagarde  may well be head of the Fed., with rates still at zero. If a Canadian man can become the Governor of the Bank of England, why not a French woman the Chair of the Fed.? Unlike the Bank of England the Fed. is still a private company with just a few international investors, just like the Beer Store here in Canada. At least as far as Canada is concerned, that begs the question if free beer would stimulate the economy better than free money. Unfortunately, Keynes himself did not offer any guidance on this matter.

We are closing in on our perfectionist target (see previous blog). This was either a series of 4-5’s or a wedge. Either way $58/$57 is the ideal point to buy.

Essentially our approach, lately,  to this stock has been that you cannot go wrong being long. Having said that, we must confess not being sure of the exact count which , normally, should invoke the “when in doubt, get out” adage.

     Our target, right from the beginning, was around $59 which was basically met. In the long run we do expect much lower values but there should be a substantial and tradable rebound in the interim. Because of this we expect the first big leg down (what you are looking at on this chart) to be five waves, for wave A, followed by a B rebound and then the C down to much lower levels.  In the above chart the 5-waves are quite clear in the middle from about $82 to $60.  At both ends it is a bit more precarious. We suspect that there was a series of two 1-2’s at the top. This should then result in two corresponding 4-5’s at the bottom. One way to ascertain that is using the guideline of alternation. When there are two very similar structures in succession obviously there is no alternation and this may point to there being a difference in degree! This is exactly what we seem to have. Alternatively there is a wedge. Either way this should be bought at $60 or less. For perfectionists $58 or less.

      The alternative, that is an a-b-c X a-b-c double zig-zag correction is shown below. The target for either a zig-zag 5-3-5 explained above , or the double zig-zag is about the same at around $45 or a little lower. See below in beige,