I wrote this back on May 15, 2012, see original blog here,
Certainly TCKB can be considered a bell weather stock and I’m always fascinated on what TCKB is doing. As you can see on our model price chart, TCKB has broken through EBV, which we calculate at $32.29. We highlight TCKB, breaking EBV back in October. Observe the weekly price bar of TCKB when the stock broke EBV back in October. You can see the volatility, and the close for the week was half way through the zone. This is typical of high profile stocks making a negative transit for the first time. The second transit, which is just occurring, usually happens with a whimper. Some would call it resignation or defeat. THIS IS NOT A GOOD SIGN. We would take this as a signal as lower prices for TCKB is ahead.
Remember no recommendation here, just a high probability event.
This is the model price chart I included with the above commentary at the time.
Teck Cominco with weekly price bars, EBV Lines (colored lines) and model price (dashed line)
Just like poker players all stocks have tells. Unconscious signals that tell opponents what the player has in his/her hand. Did anyone notice Teck Cominco’s “tell”, except for ModelPrice Guy. Did any analyst tip you off? Did technical analysis give you a hint? Just asking!
So “Smart Guy” what happens now?
First, let’s review TCKB’s model price chart as of last night.
Teck Cominco “B” with weekly price bars, EBV Lines (colored lines) and model price (dashed line)
For those interested, a daily updated chart of TCKB subsequent to this post will be maintained on Facebook, here.
As you can see, TCKB tried to “hold on” to EBV since mid-March. For 10 weeks TCKB struggled to keep its’ head above water, or its’ EBV line. News about TCKB’s, 2nd quarter earnings was enough to tip the balance for lower stock prices.
So Where Does TCKB find support?
Ultimately, I believe TCKB will go to EBV-3 or $18.82 (using Teck’s second quarter balance sheet). This may take some time, maybe only a couple of quarters, maybe next week, who knows. Yes, I know there are two more levels, between TCKB’s current price and EBV-3. These, EBV-1 and EBV-2, levels are usually not that strong in terms of price support as EBV-3, especially “well liked” equities moving downward. This is just my experience of using model price charts for over a decade.
And The Good News!
These “cyclicals”, like TCKB, will become very interesting from a valuation point of view. As the investment community and investors are going after yield, at any valuation, big discounts are appearing in equities, such as Teck Cominco, that are economically sensitive and usually non-dividend paying.
I will keep you posted!