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ABX update

Hamilton

ABX june 19 2015 ca babx june 19 2015 us b

These charts are both of ABX. On the left as measured in Canadian dollars and on the right the same thing except in US dollars. The consequences of the differences between the two can have a substantial impact on the count in EW terms that one would come up with. Things like overlap, where the top is, staying in the channel are all different depending on the currency. This is a philosophical issue that I am sure will never be answered, primarily because EW is simple discarded out of hand by some or followed with the fanaticism of myopic cultists by others. I don’t have the answer but in this case I would prefer using the US$ chart as gold is measured in US$, ABX’s operations are in the States and they report in dollars. Put in other words, the chart on the right is free from currency distortions. So is the detailed one below;

 

ABX june 19 2015 s

Our best guess here is that the entire correction took the form of a double zig-zag, i.e. an a-b-c X a-b-c. It is fairly symmetric and already well outside the channel. From the lows of about US$10 we appear to have either a wave 1 followed by an a-b-c wave 2, or a series of 1-2. In both cases the stock should go up. The XAU, HUI and CEF fund all have triangles that they should return to. None has done so so far.

Nasdaq update

Hamilton

nasdaq june 18 2015

Back on April the 24th it looked like the Nasdaq would peak in the next week or two. It did not. The explanation is quite simple that the wave 4 became a triangle and as a consequence spent an inordinate amount of time going sideways. We show a model of a diagonal which is essentially a 3-3-3-3-3 5-wave structure that often does not have alternation between waves 2 and 4. It is therefore impossible to anticipate a triangle and in the interest of the bigger picture, that is the rather violent return to the base, it is much preferable to err on the side of caution by choosing the earliest possible date. This time that proved to be wrong as we did get a triangle and that consumed an additional two months, at least in the Nasdaq.

Yesterday Yellen played the Greenspan game by saying nothing and taking a long time to do it. After thinking it through the market decided that that was good for another 78 Nasdaq points today for an all-time intraday high. The upper trend-line of this wedge, which has a total of six points on it may get it’s seventh point at around 5300.

For trading purposes all this doesn’t matter all that much as the ultimate goal is the base, so the gain simple gets bigger as this goes higher without appreciable greater risk. The QQQ may peak at around  113 or so and then a Dec. put with a strike at around 100 should be available for less than $2. It is bound to be worth a multiple of that by December.

VRX, Valeant update

Hamilton

 VRX june 17 2015

At around $170 this looked like a sell to us. It got to $308 so obviously we were off by about 1/2. Today we again think this is a sell. There are, arguable, 5 waves into the top and now the 5th wave is actually larger than wave one and three combined which is very unusual. The stock has traded up almost vertically and even left a gap behind between $220 to $240. For comparison purposes we include the US pharma+ ETF IBB which itself is a stellar performer but no match for VRX. This is one of those situation where things are “too good to be true”, perhaps because this is the only stock in this sector in Canada, there are no alternatives, except, of course, not playing at all.

RDS.B, Royal Dutch update

Hamilton

rds.b june 17 2015 5yrds.b june 17 2015 1 y

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.

rds.b june 17 2015 sc

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!