SAP , Saputo update

The usual then – 24 Dec. 2012 – and now charts;

sap dec 24 2012 ssap aug 5 2013

So we did not quite make it to the $56 level, but $54.62 is close enough. It did take longer than normal as the stock decided to kill time by doing a minor expanding triangle for minor wave 4 of 5. In any event it should now drop to the lowest point of the larger triangle, about $34 and a lot further after that (see previous blog). A sell.

SAP, Saputo update.

We thought this one was high enough at $41 almost exactly a year ago. We did not get it right but did note that we had a problem figuring out a plausible count That is still a problem. Here are the charts once again;

sap dec 24 2012 lsap dec 24 2012 s

The assumption now is that the entire move up from the great recession is one, single, 5th wave. There is , perhaps, a 4th wave triangle that seems to be missing the e. In any event it is a consolidation pattern that lasts for a year and a quarter and is then followed by the usual thrust. It has now travelled about 62% of the “mouth” and could therefore be complete. If not $56 is still a possibility on account of that particular metric. All other indicators are more overbought than ever before in the last 3 years.

We looked at earnings and revenue since 2002. Earnings are up by (very) roughly a factor of 3x and revenue by 2x. The company regularly buys back its own stock on an ongoing basis. Last year about 200 mln. at an average of just under $41 The company was founded by Italian immigrants in Montreal back in 1954 and obviously has done very well ever since. It is now the largest dairy products company in Canada.   But the stock trades at a not too modest P/E of 26, almost double the market’s. There is either an enormous renaissance going on in cheese eating or this one is a little overdone. A sell, again.

SAP, Saputo

sap big 2 sap big1

Sometimes EW is very ambiguous and at other times it presents itself as on a silver platter. The chart on the left has 5 waves up, as clear as a bell, but if you extend the time frame (as far as I can with Bigcharts), things are less definitive. Waves 2 and 4 (in purple in the left chart) are both zig-zags which is not impossible but is very unlikely to be correct. A little tinkering gives us the count on the right, here both waves 4 are zig-zags but they are of different degrees so the guideline is not violated. So much for EW niceties, either way this thing seems to be topping and is most certainly trading well above its average over many years (roughly purple line on the right). A drop back to $25 or $ 20 is entirely realistic. Again when wondering “how high is high”, the answer is simple; this is high.

A more detailed look ore or less confirms that opinion. Here is the short-term chart;

sap 3

At first blush this looks a lot like a B-wave, except that it has gone beyond what one would normally expect. B-wave (green) or 5th wave (black) matters very little,at least for the next big move. Notice that both C and A in the B-wave are equal plus a little. in a 5th wave this would make the 5th equal to 1 and 3 combined, also very common. Both RSI and MACD are dropping. Time to apply “by low , sell high”.