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MCD update

Hamilton

mcd dec 28 2015 bmcd dec 28 2015

Back in 2012 with the stock hitting the big $100 level we did think that it was a sell.  For four years after that it did trade, on average, lower than that but recently it decided to shoot up almost vertically in a $30 “thrust”.  If that is the correct interpretation those four years probable were a triangle but, possible, just an elongated a-b-c wave 4 (in pink).

     In this count wave 3 is the extended wave and therefore there is a high probability that waves 1 and 5 will tend towards equality leaving very little room to rise further. The mouth of the triangle measure suggests that it has already peaked. My gap-in-the-middle approach would allow for a few dollars higher, but then the channel is just fine with the present top. This is a short and a short now!

     Fundamentally, if you are old enough, you will remember the days  that you filled up the  gas guzzling Ford LTD stationwagon AND treated the little ones on french fries etc. all out of a $20 bill and still got change back. Not anymore. These fastfood people are pricing themselves out of the market and once people realize that potatoes and salt with sugar water added to flush it down are overpriced and not very healthy the stock will come down fast.

RY, all roads lead to Rome, that is about $30

Hamilton

ry dec 26 2015 1ry dec 26 2015 2

ry dec 26 2015 3

As far as I can tell there are 3 possible counts for Royal Bank stock. The third I would dismiss out of hand as highly unlikely. I include it only for the sake of completeness. The other two are equally possible but the one with the triangle has a greater degree of certainty and “looks” a bit better. In the end all three are pretty horrible if they come true.

MUR, Murphy Oil Corp. and COP update.

Hamilton

MUR dec 26 2015

Murphy Oil has performed in a stellar fashion abiding by most EW rules and guidelines (See also COP which has done much the same and has been the subject of our blog before).  We assume, repeat assume, that this wave up started in 1982 and lasted to 2008. We have no idea whether this is a third wave of a much larger 5 wave sequence, or a 5th wave to end such a sequence. In the former case the present drop from just above $80 would be a 4th wave (to be followed by one more wave up to new all time highs). If so, overlap is not allowed and the stock should not drop below an earlier top at about $13.  In the latter case this drop from above $80 is correcting a completed 5-wave sequence and consequently must be a wave 2. It can drop all the way to zero but not beyond that.

   The drop from the top in 2008 can be viewed as either a flat, albeit a rather skewed one, or a zig-zag. These structures have a 3-3-5, or a 5-3-5 breakdown. The intervening B-wave follows that same recipe and has done a clear flat, a 3-3-5, in which the c equals a. The retracement is usually about 61.8% as it is here.  The larger A and C waves often tend towards equality as vectors. On that basis we would predict a low around $18 or $17, or so.

   Presently it is too late to sell short, and too early to buy. But the time is perfect to keep an eye on it.

    Below we have added COP, Conoco . As you can see the chart is much the same except that the B-wave is skewed upward, that is in the opposite direction from MUR, which leaves a little more guesswork.

cop dec 26 2015

CMI, Cummings update

Hamilton

The usual then, June 15, 2014 and now charts;

CMI june 15 2014cmi dec 26 2015

See our blogs on this stock. We were targeting about $80 for the first drop, either a wave 1 or a first zig-zag of a double zig-zag as shown in the chart. The high was about $160, $159.06 to be precise on June 6th, a week earlier, but could have gone a little further to about $170. After that the stock went down rapidly to its first target of roughly $80, just about 50%. We expect a rebound from these levels after which the decline might continue to become more complex.

Diesel engines are nothing new even though there have been great improvements recently, particularly with regard to the injection systems and so on (see Borg Warmer, BWA). There is a high correlation between sales of heavy duty diesel machinery and farm income which is down by about 38% from the recent peak, so this kind of performance should be anticipated over a broader spectrum to include John Deere (DE), CAT, Kubota etc. etc. Most have yet to catch up with Cummings.