Wednesday, August 31, 2016

Are you a Bull or a Bear?

Technically a picture is worth a thousand words –certainly worth more than a compelling story. It is that compelling story that keeps us in a losing investment – long after the picture looks bad.

Technically we know the financial stocks lead the broader equity markets and finally the best technical indicator is the very long term primary trend line. So all the technician needs is a long term bar chart – monthly bars – a semi-log scale and a straight edge

The lower study is the old reliable Joseph E. Grandville On-Balance-Volume (OBV)

The plot of 10+ years of Goldman (GS) tells it all


Friday, August 12, 2016

Popular torpedo stocks;

According to BNN the shares of Concordia International tumbled six per cent on Friday after the company replaced its chief financial officer and slashed its outlook

Most technical analysts I know were not surprised – visit comments on 2015-05-22             COMMENT - Bill Carrigan re Concordia Healthcare Stock Symbol: CXR-T ($83.70) “Chart shows a long run up with a sort of spiked top. Thinks these types of companies are overcrowded trades. They are driven by promises with great stories. He would just avoid it unless you are a trader.” 2016-03-24             DON'T BUY - Bill Carrigan re Valeant Pharmaceuticals Stock Symbol: VRX-T ($41.20) “There is a technical rule on spikes. There is a head and shoulders pattern suggesting downside is on the way.  Usually it takes 2 or 3 years to correct the damage.  Does the price lead the fundamentals? He can show you that they were in trouble before the last torpedo. The technicians knew the 50% sell off was coming.  In many cases you cannot avoid them. This was a case where you could avoid it.”

The technical rule on torpedoes is that in many cases you can’t predict them (Potash) but some are preceded by warnings – such as an over-loved story that has broken down below the important 40-wk moving average – the other rule is to never invest following the torpedo – it takes up to three years to repair the story

Thursday, August 11, 2016

Stupid cheap for a reason?

A few weeks ago analyst John Zechner selected TorStar (TS.B) $1.56 as a top pick – ”this is just a pure value pick. It’s not that he likes management or the industry. It has a market capitalization of about $120 million. There is net cash of about 60. There is an enterprise value of about $60-$70 billion. Dividend yield of 16.56%. Stupidly cheap.”

Now there are a number of annoying buzz words I flee from – and one of them is cheap – I have always lost money on “cheap” stocks.

Technically the stock has a history of long bears and short bull phases.

Fundamentally the company has three paths to follow. The controlling shareholders could take the company private, or they could sell the company or – they could press on and take the stock to penny stock status. Eventually most penny stocks get delisted – a sad end to a once great enterprise.

Friday, August 5, 2016

Watch the U.S. Financials:

Just to refresh - the term Bellwether – was derived from the Middle English Bellwether which refers to the practice of placing a bell around the neck of a castrated ram – (a wether) in order that this animal might lead its flock of sheep. Just to refresh - no bull market can operate without the leadership – or participation from the financial sector.

Just to refresh – on the bullish inverse head & shoulder (H&S) formation. Bigger is better – so yes a daily bar an inverse H&S is good – but a larger weekly bar inverse H&S is better. Also the first or left shoulder should be longer in duration than the right shoulder and the volume is usually greater on the left shoulder – sometimes the head has the most volume but never the most volume on the right shoulder.

Two charts today – a daily bar of the SPDR Financial (XLF) displaying a small inverse H&S and a weekly bar of the SPDR Financial (XLF) displaying a large inverse H&S – clearly very bullish for the broader U.S. equity markets.