WJA

WJA, Westjet update

Hamilton

The usual then, July 11 of this year, and now charts;

WJA july 11 2017wja sept 19 2017

$27 was the target at that time and that was reached just a few days ago. It looks complete now. Not only is the structure of the rebound a clear a – triangle b – c, that is a corrective move, pretty clear but it also retraces a little more than 62% of the drop AND both the MACD and the RSI have turned down more than a month ago.

If the A-B-C scenario is correct, this stock could reach a level of $12 or so. Time to disembark ?

Air Canada, that was featured in the same blog, went three or four dollars higher than we anticipated which just proves that perfection is elusive.

AC update from about two years ago, WJA

Hamilton

The usual then and now charts;

ac july 29 2015 bAC july 11 2017 b

So we got the drop from $15 to $5 pretty well  on target except that it did not quite get there stopping at about $7 instead. But we ignored the stock for the simple reason that we basically do not understand why anyone would want to own any airline stock!

Now, with the benefit of hindsight, we are leaning towards discarding the original count all together. The peak at $15 was not the end of a 5-wave sequence, just the end of wave 3, or, alternatively, we were not even in a bull market and what we are looking at is actually an A-B-C for a larger B-wave counter-trend rally which now has reached the double top level and may, therefore be complete. Additionally the A and C sub parts are now equal at least in terms of gains in the stock, each at about $14. This stock should be sold here and now.

WJA or Westjet is thrusting from some sort of triangle and may have a little more to go, perhaps up to $27 but it should then also be sold.

WJA july 11 2017

WJA, Westjet and AC, Air Canada

Hamilton

wja july 29 2015 bwja july 29 2015 s

There is very little in this chart that is clear. However it would appear that the last leg up is one of those diagonals or wedges. The are always in either 5th wave or c wave positions. The immediate expectation then is for a drop to the base of that pattern which, at around $19, is not that far away. When using EW you do not have to get it all, as long as you have one pattern that is recognizable without a doubt you can sort of construct the whole picture. It helps in those circumstances to get confirmation from another stock that is in a similar business etc.etc. Air Canada fits that bill:

ac july 29 2015 bac july 29 2015 s

The timeframes are not the same but at least here you see that the diagonal or wedge is as perfect as it can get. This implies that we are at a fairly major top and that there is still considerable downside, at least for AC, ahead.

Airlines do not own the infrastructure they operate in. They do not own their planes as these are often leased on an operational basis so that the capital costs can be amortized by those that are in a better position to use the deduction. Sometimes they even “wet” lease the planes. Fuel costs are entirely out of their control all though , at times , hedging might be appropriate. In short you control very few of the inputs and consequently, and history shows this, it is not unusual for management to get carried away with some expansion programme that soon kills the whole thing. Life expectancy in this business is fairly short, these are speculative investments at best. AC , of course, fell some 90% as it flirted with bankruptcy as a result of the great recession. The diagonal in that case may actually be part of a B wave which would spell disaster. See also our prescient blog of June 4, 2015.