Monday, March 30, 2009

It is not sub-wave iv of wave 5

Not your time yet.

In my last Tuesday (24 March) post, I talked about 3 possibilities for Dow. Last 4 sessions confirmed that Wave 5 is not a simple 5 waves, the supposed to be sub-wave iv rebound has gone too high and has dragged for too long. From wave 4 down, Dow has only 3 waves i-ii-iii as shown, a bullish view is to take iii as the end of the down trend since October 2007 and that the last two weeks rebound is the begining of major wave B rebound that can last until end of 2009. I am rather reluctant to accept iii as the end of wave 5 because sub-wave iv and v are missing, I am more inclined to go for the probability that wave 5 take the form of a diagonal triangles.

From wave 4 downwards, the subsequent i-ii-iii formed the first wave of 5, Dow is currently in the wave 2 of 5 as shown .

Refer to the sketch below, Dow is in the wave 2 of (5). It will zig-zag downward to complete 3,4 and 5 of (5).

The wave 3-4-5 shown above were not drawn based on calculated projection. The magnitude should be smaller and duration shorter. Dow in the next few days is expected to move up to complete the 2 and then to come down to form the 3. However if Dow moves up too high for too long, I will have no choice but to accept that there are some missing waves and Major Wave B rebound has started.

Li Ka-Shing "It's time to buy"

Last thursday (26 March) Mr. Li Ka-Shing said "If you have money in your pocket, consider buying into stock". As for the property market in Hong Kong, he said,"History tells us that if you buy in a slow market, in a medium term you get good returns". However, he recognized that the environment remains shaky and volatile and advised against borrowing to invest. His proclaimation sent Hang Seng Index up 3.6%.

As mentioned in my post on 26 March 2009, It is very likely that the low of 11,015 on October 2008 is the bottom for Hang Seng as shown above.

The wave 1 as shown is a leading diagonal followed by a simple a-b-c corrective wave 2. It is currently in sub-wave i of wave 3. Sub-wave ii of 3 provides good entry point as sub-wave iii of 3 is usually very powerful and juicy.

Let's look at Mr. Li core companies, Hutchison Whampoa Ltd and Cheung Kong Holding. Hutchison's peak in October 2007 was HK$98.45, the stock fell all the way to HS$34.10.

From November 2008 low of HS$34.10, it completed wave 1 at HK$44.60, followed by a-b-c formation for wave 2. It closed last Friday at HK$41.90. Next pull back will provide good entry point. As this is a low risk stock, it may give only 50% to 60% return.

Cheung Kong's peak is HK$158.30 in November 2007, unlike Hutchison, it moved in 5 down waves to a low of HK$56.00 in March 2009. Since then it has recovered to HS$71.00 last Friday.

For Hutchison, the November 2008 low is very likely its bottom, whereas the HK$56.00 low of Cheung Kong two weeks ago may not be its bottom. The wave A assigned needs confirmation.

Sunday, March 29, 2009

Earth Hour 28 March 2009, 8.30pm to 9.30pm

Chit-chatting with my wife and son in front of my TV.

One hour of light off does not make much difference to the earth but I hope it can raise awareness. I hope more people will bring their own eco-bags to the market and will bring their own container to 'ta pau' food.

Saturday, March 28, 2009

Las Vegas Sands

Las Vegas Sands (LVS) is a Casino resort company based in Las Vegas, Nevada, USA. Founded in 1988 by Sheldon, a majority share holder with about 65% of the company. LVS is the owner and operator of two resort-hotel-casino in Las Vegas, "The Venetian" and "The Palazzo", its also own the "Sands Expo and Convention Center" also in Las Vegas. In Macau it has two resort casinos. In Singapore, LVS has won the right to develop "Marina Bay Sands Casino Resort". Its list of properties is as shown below.

Its earnings from 2004 to 2008 as shown below were not impressive.

As shown by the chart above, its stock price peaked in October 2007 at US$145.57 with market capitalization close to US$ 50 billion making Sheldon Adelson one of the world's riches men.
Before the current financial melt down, LVS has launched its ambitious expansion program totalling US$16 billion in building casino resorts in Macau and Singapore to cater to wealthy asian gamblers. It was also building a $600 million condominium in Vegas and a $600 million casino resort in Bethlehem , Pennsylvania. The current financial crisis and the associated credit crunch has affected its earning and the viability of its development programs. Facing with cashflow problem due to shrinking earning in both Las Vegas and Macau (restriction of visas Macau by Chinese Government), declining stock market, possible default on dabt, dumping of stock by investor and other bad news, the stock price has dropped to a low of US$1.38 before recovering to US$3.14 on Friday. At its low, its market capitalization was onlr $0.92 billion.

The chart formation so far does give any indication that the $1.38 level is the bottom of LVS. Hopefully its next pull back can show some direction.

In the last few months, there were some possitive development for LVS. In November Sheldon Adelson and his wife Miriam Adelson loaned LVS $475 million through a 6.5% convertible note due in 2013 to avert a default on debt. In an effort to raise operating capital, Sheldon Adelson and his family has agreed to put in another $525 million to buy 5.25 million shares of preferred stock and warrents that allowed the family to purchase 87.5 million common stock at an exercise price of $6.00 each. LVS is currently seeking to take advantage of low prices of its loans (60 cents to a dollar) by buying back the debt worth $800 million. LVS is seeking waivers or amendments to its bank agreements.

Friday, March 27, 2009

The Chart of US's Stocks

Harmless Little Bear

There are many US stocks appeared to have started the major bear market rebound (major wave B) ahead of the Dow. I don't think Dow has finish its bear journey yet.

AIG's peak was set in October 2000 at US$103.75 (Dow was about 10,500). It dropped to about US$50 in February 2003 for its wave A (Dow = 8,000), rebounded to US$72 in May 2007 to form wave B (Dow = 13,500 and peaked 5 months later at 14,164). Its low two weeks ago at 33 cents is very likely its wave C. (I should have used 1-2-3 instead of A-B-C because the 33 cents location is actually the Major Wave A for AIG). From 33 cents it rebounded to US$2.00 for a 500% gain.

Since the 33 cents low, AIG has formed its sub-wave 1 and has started its sub-wave 2. It closed last Thurseday at US$1.10.

Citi Groups pattern is exactly same as AIG with its peak at US$77.75 and its low at 97 cents set two weeks ago to complete its higher degree Major A Wave. Similar to AIG it has started its Major B rebound ahead of Dow.

Citi has also completed its sub-wave 1 and is currently forming its sub-wave 2

BAC has its peak in November 2006, much later than AIG and Citi but the form is the same with its low at US$3.00 set two weeks ago.

Similarly BAC is currently in sub-wave 2.

Las Vegas sands has a chart that is more in line with Dow. Same as Dow it has its peak in October 2007 at US$ 145.57. It touched a low of US$ 1.38 two weeks ago for a 99% drop. In the process it has formed 7 sub-waves as shown. (7 wave in Elliott can be treated as equavalent to wave 1-2-3 with wave 3 having 5 sub-waves).

For Las Vegas Sands, currently it is either in wave 8 or it can be in sub-wave 1 if wave7 is the end of major wave A. Hopefully the next pull back can provide some indication and hopefully it can provide a good entry point.

The long term charts of Fannie Mae and Freddie Mac looked similar to all the above bank stocks, however their 6-months charts looked different. Both Freddie and Fannie have completed their sub-wave 1 and 2 and also sub-sub wave i and are currently in their respective sub-sub-wave ii of sub-wave 3. Please take note of the double bottoms formation. If this reading is correct, the next surge is going to be the dynamic and powerful sub-sub-wave iii of sub-wave 3. This iii of 3 most likely will break the neckline of the double bottoms with high volume. ( neckline is a line formed by joining point1 and point i of the above chart). I must pray very very hard for it to happen.

Thursday, March 26, 2009

Stock selection for major wave B rebound

Go for stocks that can at least double its price (use chart formation to project the target price). If possible, on the safe side, get a fundamentally good stock, company with good management, high dividend and high asset backing. Try to balance between risk and return, the usual rule higher risk higher return, lower risk lower return. Use charts to determine the entry points.

In general there are stocks that (A) move ahead of the market; (B) move inline with the market and (C) lag behind the market.

The above stock is one phase ahead of the market with stock well above its low that was set in October 2008. Since then it has completed its wave 1. It is currently in sub-wave b of wave 2. Wave c provides good entry point. Wave 3 target price is at least equal to that achieved during wave 1 advance. Normally wave 3's length = 1.618 x wave 1's length. In a strong run up wave 3's length can equal to 2.618 x wave 1's length. This is a typical stock already in motion.

The above is also ahead of the market. This stock has yet to complete its wave1 and its current price is much higher than its October 2008 low. For stock of this chart-form, there is a short term run up to complete sub-wave v. Wave 2 low can be good entry point.

The above stock is ahead of the market but its current price is moving close to its October low. It is in the process of completing its wave v of sub-wave C of Wave 2. It is forming a bullish double bottoms reversal pattern. Monitor closely for entry. Next up surge the volume should be higher than wave 1 volume. If it can break the top of wave 1 with high volume, minimum target price is another wave 1's length up from the top of wave 1.

This stock as shown above is slightly ahead of the market. Wave A was completed in early March 2009. It is currently in sub-wave ii of wave 1. Sub-wave ii is excellent entry point. Watch out for the possibility that the current rebound is sub-wave i of wave 5. Run for your life when prices drop below point A.

The above stock is inline with the market trying to finish its sub-wave v of 5 that is a good point to enter the market. Basically this is a weak chart, it will lag behind the rest. The strategy is to monitor its wave 1 to assess its potential while trying to make a double from wave 3 of other stocks. Easy to talk but require hard work and close monitoring plus luck to achieve.

The last chart illustrates a stock that is going for a-b-c-d-e correction for wave 2. sub-wave iii of wave e provide good entry point. Watch out for triple bottoms formation accompany by diminishing volume.

Have a look at major world bourses

I seldom write on other bourses because all of them, for most of the time, look to Dow for direction. When Dow is in a major trend, all the rest of the world will move in the same direction and way with more or less the same pattern with minor variations. Just look at all the following charts, at first glance, one may think that they are the same chart. They all peaked in October 2007 except Japan Nikkei 225 and France CAC 40 both have their peaks in July 2007. KLSE is the odd one, it peaked in January 2008 when the rest of the world have moved lower. However, minor variations started to appear in the first few months of 2009, an indication that the bear is is closer to the end. The following discussion uses Dow as the base reference.

The European bourses in their respective down trend followed Dow very closely with almost identical pattern. All of them having their lows in early march 2009 followed by a rebound that lasted until yesterday. If the current rebound is sub-wave iv of wave 5, the next down trend offers good entry point for stock purchases.

Except Singapore STI that has a similar pattern as that of Dow and has its low in early March 2009, the rest of the Asian bourses have their respective lows in November 2008 and since then have not broken that lows. Nikkei and Hang Seng are forming possibly double bottoms reversal pattern. KLSE is posibly forming a triple bottoms whereas Shanghai has been moving steadily in a steeper up trend channel. Bourses with their lows in November 2008 are currently in the early stage of Major B Wave. So far they have completed wave 1 and are in the process of completing the last sub-wave of wave 2 or wave c of 2. Similarly the next pull back provides good entry point.

Tuesday, March 24, 2009

Next few days very crucial

Whose turn now ?

Since October 2007 peak, Dow has been moving lower to complete its Major Wave A as shown in the above 2-years chart. Currently Dow is in sub-wave iv of wave 5, the next pull back can be sub-wave v of wave 5. hopefully that is the end for Major Wave A.

The 6-months candlestick chart shows more clearly candlestick pattern the formation of sub-wave iv of wave 5. Lately, due to a few sessions of strong run up of New York market, some investors have started to question whether the low of 6547 set on 9 March is the bottom and whether Dow is going to move higher from here for the next few months. There is no definite answer to the question, if there is, the market can not exist. However we can talk about the possibility of the outcomes. To do that I have to magnify the sub-wave iii and iv of wave 5 as shown below.

There are many possibilities, I will discuss the 3 most likely outcomes (my personal opinion). The first possible outcome is what I have been advocated, a simple wave 5 consists of 5 sub-waves i, ii, iii, iv and v. It appeared to me that the Dow tuesday green candle marked the end of sub-wave iv, Dow has started its journey for sub-way v, and daily trading volume will shrink. The chart above shows clearly a typical corrective wave that consists of a long wave 1 and a short wave 3.

The second possible outcome is very very bullish. This is under the assumption that Wave 5 has only 3 sub-waves i, ii, and iii. Sub-waves iv and v are missing. With that sub-wave iii is the end of Major Wave A. Under this scenario, refer to the above chart, starting from point iii, the first wave up is a small wave 1 of the new up trend wave followed by a small wave 2, Dow is in small wave 3 currently. This wave 3 is expected to be longer that wave 1. This longer wave 3 consists of 5 mini waves, Monday and Tuesday candles formed the mini waves 1 of 3 and 2 of 3. Under this scenario, the coming candle on Wednesday or Thurseday has to be long (4% to5%) with very high volume. Mini wave 3 of 3 has to be strong, dynamic and convincing, and no doubt at all that the bull is running.

The third possible outcome is another version of the second outcome mentioned above. i.e. sub-wave iii marks the end of Major Wave A. Dow has completed its first up trend wave 1, currently in corrective wave 2 that has 3 waves a-b-c as shown above. Wave 2 can be an expanding a-b-c as shown with b higher than a (as shown) and c lower than a. Wave 2 can also take the form of a running a-b-c with b higher than a (as shown) but with c lower than b but higher than a.
The followings are the charts for some interesting and very high risk stocks. Normally very high risk means very high return if you are lucky.

From US$144.00 dropped all the way to US$1.42 a few days ago. Tuesday closed at US$2.65

AIG, one of my favorites. From US$72 it dropped to 35 cents and closed at US$1.48 for a two double gain from its low.

For Citi Groups and Bank of America, the worst that can happen is nationalization but Bernanke has mentioned that the US government has no such intention.

For Freddie Mac and Fannie Mae, if the government is using US$1.2 trillions to take over their bad mortgage securities, their future can not be that bad.