RY

Canadian Banks.

Hamilton

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.

RY, Royal Bank

Hamilton

ry june 1 2015

A few days ago Royal reported 2nd quarter earnings (1st quarter of the year) and they were good. The Royal now makes profits of $2.5 bln. every quarter or $10 bln. a year. To put that in perspective that is roughly $282. for every man woman and child in the country. There are about 35.4 mln. people in Canada.   The Royal has about 78.000 employees both full and part time, so the profits are about $128.205,00 per employee. Nothing to sneeze at. They were about to nickel and dime us for a little more but then, at the very last moment, decided to drop that idea, at least for now.

Looking at the EW count, this looks like a complete correction from the Feb. low. Ergo the next big move should be down.

RY, CYN City National Bank

Hamilton

cyn jan 22 2015

Royal is buying City National Bank of California for US$5.4 bln. The stock got to $89 on the announcement. If and when this goes through there will probable not be any stock left to trade but we can always pretend. The chart is relatively clear , from the lows it is either a B-wave, like most stocks, or a 5th wave. Either way the next move should be back down to about $25. This stock trades at a p/e of about 22, compared to RY at about 12. RY only recently got rid of Centura Bank in Florida, despite all the snowbirds they could not make a go of it. The timing is also rather odd. RY is down about 10% over the last few months and the C$ more than that so they are paying roughly 20/25% more than they would have had to do a few months ago.

We did not expect RY to trade above $82.50 ( see Sept. 17th 2014 blog). Of course it did and briefly reached $83.87. It should go down quite a bit further so this acquisition may help that process along. See below;

RY jan 22 2015

RY, Royal Bank

Hamilton

ry dec 3 2014 canry dec 3 2014 us

The Royal is reporting this morning and no doubt things will just be fine. It is hard to miss if you are shooting fish in a barrel. We think the stock is overbought but today that is not the subject of this blog.

The two charts above are, of course, both of the Royal Bank. The difference is marked in a very subtle way in the upper right-hand corner, using the currency signs for the Canadian and US dollar. Interestingly in Can $ terms one would be inclined to count an a-b-c down followed by a new impulse wave up. On the other hand, in US $ terms the best bet seems to be an a-b-c down, followed by an a-b-c up which cannot anymore morph into a 5-wave structure as there is already overlap. Which one is correct? We will know soon.

P.S. It just occurred to me that there is a way to resolve the above dilemma or contradiction and that would be to assume that the stock is making a triangle. In C$ terms it would be an irregular triangle and in US$ terms a normal triangle. Even then the last up move in C$ terms must be 3-waves which it does not appear to be.