TRQ, Turquoise Hill Resources, update

TRQ march 2016trq mar 3 2016 s

See also our earlier blogs. Our big picture take on this stock has not changed at all. However, in the small picture we may have anticipated the low one single minor wave too early, that is the one dollar plus dive at the beginning of this year. We do not have charts that have high enough resolution to actually count minute waves properly. The $2.30 intraday stacks up quite nicely with the closing low of $2.28 eight years ago.

Note that this stock is correcting from the high near $30 in one , single A-B-C, 3-3-5, zig-zag, correction. This has been the case with most commodity related stocks as opposed to others that often follow the “flat” pattern. As far a I can ascertain the stock has fulfilled all the required subdivisions that one would expect and therefore should be in a new bull phase. The only alternative, given the proximity to zero, is that the company goes bust. This is extremely unlikely given the combination of a Mongolian government and Rio Tinto.

We never anticipated that copper, the metal itself, would trade below $2. It did early in this year but very briefly and also appears to have made a bottom. So, given all that things look pretty constructive. By the way, this is an absolutely huge project with most of the infrastructure already in place.

copper march 3 2016

See also previous blogs on copper.

TRQ update and Copper, the stuff

The usual, then Feb. 2014, and now charts;

TRQ feb 2014 bTRQ june 23 2015

Turquoise Hill Resources – formerly Ivanhoe – had completed a full correction, an A-B-C, with all the requisite subdivisions , in particular a 5th wave wedge in the C leg, which confidently suggested this was a buy. It was. The low was at $3.17 and the high after that at $5.80 and we defined the break-out point at about $4. In short you could have easily made 30+% This massive mine is now owned by Rio Tinto (51%) and represents a significant part of the Mongolian economy. A collaborative approach to operating this asset is now in everybody’s interest. Consequently more upside is in the cards. In EW terms $10, the base of the wedge or wave 4 of C, is a reasonable goal.

Copper itself may not fare quite as well. It has not returned to the lows of 2008/9, not even close as this long-term chart clearly shows;

Copper  1957-2015  Data  Chart

or in more detail;

Copper Kitco june 23 2015

Starting with the top chart, this is from the LME where they do things in pounds per ton, it is obvious that we are still well above the yellow 50+ year channel. So, if we were ever to regress to the mean, there is still serious downside potential, perhaps towards $2 or even $1.50 a pound. EW targets would be even lower than that, more like $1.25.

If nothing else, the long-term chart of copper shows how extraordinary this, give or take, ten year period from 2004 to the present has actually been. Linear extrapolation no longer has any predictive value.

TRQ, Turquoise Hill Resources update.

trq july 2014 btrq july 17 2014 s

In many respects TRQ, the old Ivanhoe, resembles AA. The big difference is that it has done very little so far. As we have no reason to change our analysis we continue to like this stock’s potential. At the low of $3.20 on the 3d of January 2014, this stock had, just like AA lost 90+% of the peak value and was sitting right on the long-term support line. Perhaps this is what the Fed. means with “psychological trauma”, the new economic term added to the lexicon of Fedspeak, the other day. Click on the graphs and move them side by side to get a greater appreciation of the similarities.

TRQ, TSX, Copper and so on

The other day there was this fellow on BNN that suggested that the TSX has broken lose from its correlation with copper. He is pretty good (Price?) despite sometimes looking like a hippie. Here is the argument:

tsx feb 15 2014Copper feb 15 2014

The InfoMine Copper chart is expressed in US dollar terms and the TSX in Canadian; both charts cover roughly the same time period. The correlation is not perfect but does get a little better if you make adjustments for the exchange rate (a low in 2001). Certainly for the past few years the correlation is pretty good, but notice that in the last year the two have parted company with the TSX going up and copper going down. Perhaps Canada is more a petro country than a copper country. In any event I have drawn a line through the TSX chart which is my best effort at finding the middle of the range for the past 25 years. If that line holds (on average) the TSX should be at about 15000 in 3 years time (starting where it is now, not where it is on the average line). That works out to about 10% for the whole period or roughly 3 % per annum. The question is “Why would you do that??”. Why not buy TRQ instead?;

TRQ feb 2014 bTRQ feb 15 s 2014

We thought (see previous blogs) that this stock was a screaming buy. It did go up about 30% but has settled down back to $3.25. A drop to $2  ( a wave 4 of prev. degr.) or so cannot be completely excluded but we prefer to think that the stock is already on the way up. The initial target regardless of the path it takes, is around $5.50 (the wave 4 of 5 of C triangle). The copper price is barely relevant and it has a lot of gold as well. In short , if you like the TSX because it correlates well with copper you have to like TRQ more. If you like the TSX because it has detached itself from copper, you should also like TRQ more as it is down 90% rather than about 10% for the TSX.  Buy low sell high, not buy high and sell low.