NAB - National Australia Bank

[sasch]

Ian, we'll have different views based on our circumstances. My focus is on preservation of capital. So if I'm at all fearful of eg GFC MK2 I will want to preserve most of my profits. It worked well for me when the GFC occurred.

Some people took the view "why sell? you're still getting your dividends and franking credits." OK, but if things get bad enough those dividends are not guaranteed either. And if you needed that invested capital for anything, at the bottom you had 50% less of it than pre GFC. I'm not up for that sort of risk.

A big difference between then and now is that the GFC was accompanied by a credit squeeze which forced the banks to offer pretty high interest rates eg 8%.

If one isn't paying tax then that's an acceptable enough place to park money while the market falls....

Julia,
Slightly off topic - While Australian banks came off relatively unscathed during the GFC, a possible 'GFC MK2' scenario could see a different outcome, considering their current high exposure to household debt. Would you weigh up the risk of a potential bank collapse versus parking your money in stocks?

 

[herzy]

I think probably a year or so before the GFC hit, share prices were well above sensible fundamental valuations. While an investor might have been disciplined and sold at that point, it takes a lot of discipline and self-confidence to continue to believe / trust in your own fundamental valuation after you have sold and when the market continues to run for a year or more. Your valuation says the market is getting even more over-priced but the herd is saying "look at the returns you are missing out on". It takes a lot of discipline and patience.

Excellent post. Selling is something I still struggle with. I have little confidence in my ability to sell in what I think is a bull market (like now... ). But then again, I guess the learning never stops...

 

[Julia]

Julia,
Slightly off topic - While Australian banks came off relatively unscathed during the GFC, a possible 'GFC MK2' scenario could see a different outcome, considering their current high exposure to household debt. Would you weigh up the risk of a potential bank collapse versus parking your money in stocks?

sasch, I agree that a different outcome could occur if we were to experience Mk2. There is, however, a greater awareness of this possibility. Under almost any circumstances, I wouldn't see the government allowing any major bank to fail. The resulting chaos would have massive repercussions throughout the whole economy.

Hi Julia

Would you mind sharing some of these factors? Just to make sure I am not missing anything in my own thinking!!

Coolcup, we're rather getting off track from the NAB thread, and I'd prefer not to list what makes me concerned.
I might be quite wrong. But just thinking about the global situation what do you see? Is it positive?
How will you interpret the eventual cessation of QE and rising interest rates in the US? What effect will that have on Australia? What will be the effect of diminishing commodity prices? Of China's growth rate etc? The falling $A dollar with consequent withdrawal of foreign investment?

Even at home we have a complex political landscape, minimal confidence in government and society in general, terror becoming a priority. It's hardly a picture to build confidence.

Probably, however, I'm generally pessimistic so as to have always a plan for the worst that could happen.

Agree with you that investors in different stages of their journey will have different preferences for the amount of equity market risk they are willing to accept.

In my view it's my job to buy good businesses at less than I think they are worth. If I become unable to trust my ability in my attempts to analyse and value these businesses - then I allocate my equity exposure to a low cost index fund which will remain invested at all times. If I cannot value single businesses, I find it hard to believe that I can time the direction of the market in order to avoid the corrections and cash in on the big runs...

OK, understood. This is where we have a divergence. I have no interest in "analysis and value" of any business. I'm only interested in what price market sentiment places on a stock. Just like property: any stock/property is worth what someone is prepared to pay for it.

I acknowledge that this is anathema to fundamental/value investors.

But I'll continue to do what works for me as you will do what works for you.

As said earlier, I have fairly small proportion of funds in the market, chosen for grossed up yield, top 100, bought when at call rates fell to their present point.
The intention when buying was to hold throughout any volatility, given essential bulk of capital is not threatened, but old habits die hard and I'm finding it quite difficult to continue to accept the rationale for such a p/f as the market falls.

Funnily enough, I'd say that quite a few good businesses would have been qualifying for sells based on exceeding valuations in the period leading up to the GFC, where exuberance of other market participants caused you to take your risk off the table. So perhaps the outcome is largely the same, just the methodology is somewhat different.

Sure. I'm reminded of a great post many years ago by Bunyip where he described price action/trend following as simply seeing what all the value/fundamental investors have already put the analysis into.
You might find it interesting. If you look up Bunyip's profile, it would be probably in the first ten of his posts following his joining the forum.

I think probably a year or so before the GFC hit, share prices were well above sensible fundamental valuations. While an investor might have been disciplined and sold at that point, it takes a lot of discipline and self-confidence to continue to believe / trust in your own fundamental valuation after you have sold and when the market continues to run for a year or more. Your valuation says the market is getting even more over-priced but the herd is saying "look at the returns you are missing out on". It takes a lot of discipline and patience.

Hence the preference by some of us to just work on price action/trend.

 

[coolcup]

Coolcup, we're rather getting off track from the NAB thread, and I'd prefer not to list what makes me concerned.
I might be quite wrong. But just thinking about the global situation what do you see? Is it positive?
How will you interpret the eventual cessation of QE and rising interest rates in the US? What effect will that have on Australia? What will be the effect of diminishing commodity prices? Of China's growth rate etc? The falling $A dollar with consequent withdrawal of foreign investment?

Even at home we have a complex political landscape, minimal confidence in government and society in general, terror becoming a priority. It's hardly a picture to build confidence.

Probably, however, I'm generally pessimistic so as to have always a plan for the worst that could happen.

Agree it is a bit off topic but thanks nonetheless! The points you raise are valid but the thing I have been wrestling with is that none of them (aside from perhaps the terrorist one) are new and have been around for several months if not a year or so:

(a) Cessation of QE and rising interest rates in the US has been flagged and spoken about at length. Markets have had plenty of time to consider and price this
(b) Diminishing commodity prices - again has been happening for a while now as supply outstrips demand
(c) Falling A$ - this was meant to be the godsend the RBA has been praying for. Again, has been spoken about for a while.

In my head I am trying to work out if anything are any truly new themes at play or if it is different takes on the same major issues the equity market has been grappling with for some time.

Anyway, I understand where you are coming from. There is a lot of uncertainty...

 

[herzy]

Falling even further and with a chunky dividend coming up in 45 days it's looking more tempting.

 

[pinkboy]

Falling even further and with a chunky dividend coming up in 45 days it's looking more tempting.

Yes, buying NAB along with ANZ and WBC at the moment should see around 3% yield for the single dividend alone in the coming couple months.

pinkboy

 

[coolcup]

Falling even further and with a chunky dividend coming up in 45 days it's looking more tempting.

3 dividends in 14 months... very tempting

 

[sptrawler]

Falling even further and with a chunky dividend coming up in 45 days it's looking more tempting.

I'm with you on this.

 

[rimtas]

Updating my thoughts about recent development in this stock.

I think This Is It. There is no better risk reward ratio that current situation. If NAB is in A Triangle formation, it is over at todays close at 32.13.

The E waves can briefly cross C wave's bottom in a pannic, but wave A low is formidable for this pattern to be in effect. So basicaly a stop should be below 31.90, just a bit more than 20c risk.
I'll be conservative here-minimum target is previous high of 37.4, so basicaly about ~$6 from here, but usually thrusts from a triangle produces much more.
Tomorrow will tell, I am in, stop order is placed.

 

[Porper]

Updating my thoughts about recent development in this stock.

I think This Is It. There is no better risk reward ratio that current situation. If NAB is in A Triangle formation, it is over at todays close at 32.13.

The E waves can briefly cross C wave's bottom in a pannic, but wave A low is formidable for this pattern to be in effect. So basicaly a stop should be below 31.90, just a bit more than 20c risk.
I'll be conservative here-minimum target is previous high of 37.4, so basicaly about ~$6 from here, but usually thrusts from a triangle produces much more.
Tomorrow will tell, I am in, stop order is placed.

View attachment 59601

At best it can morph into an descending triangle meaning $31.90 can't be breached. Wave E cannot break through wave C ever as far as I am concerned. Price must coil in a symmetrical triangle. Also, the final leg down doesn't look like a corrective pattern. In fact it looks impulsive which is a warning sign of further weakness to come...possibly following a bounce as it looks oversold short term. Just my personal thoughts.

 

[herzy]

I entered today at 32.17 - will be happy to hold for the medium term.

 

[rimtas]

Hi Porper, let me reply to your post.

At best it can morph into an descending triangle meaning $31.90 can't be breached .

Yes, I agree with you, it is still a possibility that only Wave C has bottomed. Until Wave B highs are not breached this scenario ir highly probable.

Wave E cannot break through wave C ever as far as I am concerned

Actually it can. As wave E is a fifth wave, it can be extended and in all sorts of triangular structures(as Leading , Ending Diagonals and all sorts of Triangles) extended waves creates a "throwover". Wave Principle explains that this occurs more often than not, and one must expect this to happen.

Price must coil in a symmetrical triangle.

Not necessarily. Triangles can morph into so many shapes that you will not have so many fingers on your arms and legs to count them.

Also, the final leg down doesn't look like a corrective pattern

As long as it consists of 3 waves, doesn't mater how it looks. Fifth waves in Triangles can be extremely volatile as they are ending waves-psychology in an ending wave can be extreme also, creating an "impulsive like " look.

Thank you for a constructive discussion. Cheers mate

 

[Porper]

Hi Porper, let me reply to your post.



Yes, I agree with you, it is still a possibility that only Wave C has bottomed. Until Wave B highs are not breached this scenario ir highly probable.



Actually it can. As wave E is a fifth wave, it can be extended and in all sorts of triangular structures(as Leading , Ending Diagonals and all sorts of Triangles) extended waves creates a "throwover". Wave Principle explains that this occurs more often than not, and one must expect this to happen.

Not necessarily. Triangles can morph into so many shapes that you will not have so many fingers on your arms and legs to count them.

As long as it consists of 3 waves, doesn't mater how it looks. Fifth waves in Triangles can be extremely volatile as they are ending waves-psychology in an ending wave can be extreme also, creating an "impulsive like " look.

Thank you for a constructive discussion. Cheers mate

Think we'll have to disagree on some of those rules and guidelines. The problem to me is that if we bend the rules and ignore the guidelines then the Wave Theory is of little use. Almost any pattern, impulsive or corrective can be made to "Fit" almost anywhere. I suppose it boils down to who you follow. Elliott himself , Prechter or somebody like Miner who uses The Wave Principle in its most simple form.

 

[rimtas]

No, I am not trying to bend anything o disregard rules. Rules are rules, thats how markets move, ignore rules=ignore market behaviour. Elliot and Prechter did a good job in summarising guidelines, and I believe that more new discovered guidelines to be added in the future .
But rules are just a few, we can't ignore them, because it directly lead to losses. Market observation is a key to understanding the Wave Principle.

 

[rimtas]

Hey Porper, do you agree with this ASX count?
https://www.aussiestockforums.com/forums/showthread.php?t=4888&p=842859&viewfull=1#post842859

 

[rimtas]

Let's see what is going on after the bottom was set up. This is the only stock that I am holding at the moment so I will be updating charts until I get stoped out or take profit.

NAB failed to form a clear 5 wave move up which could added more confidence, but instead it moved in threes and formed an expanding looking Leading Diagonal, which could also be a motive wave.

Expanding Leading Diagonals after a sizeable correction usually leads to a sharp thrust higher in a third wave, but as they have no any Impulsive subdivisions, they can be labelled as a simple WXY correction if the bottom falls out.
To protect a capital stop is just after a bottom, which at this stage can not be moved higher, because wave (ii) can retrace up to 99% down.

Price is still in a descending channel, but it should brake higher in the coming sessions if the larger size count is correct.

 

[PennD]

Let's see what is going on after the bottom was set up. This is the only stock that I am holding at the moment so I will be updating charts until I get stoped out or take profit.

NAB failed to form a clear 5 wave move up which could added more confidence, but instead it moved in threes and formed an expanding looking Leading Diagonal, which could also be a motive wave.

Expanding Leading Diagonals after a sizeable correction usually leads to a sharp thrust higher in a third wave, but as they have no any Impulsive subdivisions, they can be labelled as a simple WXY correction if the bottom falls out.
To protect a capital stop is just after a bottom, which at this stage can not be moved higher, because wave (ii) can retrace up to 99% down.

Price is still in a descending channel, but it should brake higher in the coming sessions if the larger size count is correct.

View attachment 59643

Hi Rimtas,

Are you still expecting this stock to break higher? It seems to be going sideways.

Cheers

Penn

 

[rimtas]

Hi Penn, yes, I am looking for NAB to break higher later in the week.

As it is already have broken out of the bearish channel, it is considered to be bullish. In the very near term I expect it to touch that channel in a 32.5 range, where I am looking to increase my position.
Only if it closes inside a channel again, it will immediately shift the odds towards a bearish case. Other big banks also have quite a strong structures for a rebound that could last weeks/months(maybe till Christmas).

My only concern is that a mining sector is poised for a further crash which could impact the broader indices to go down and this could drag the banks lower also. It is a risky call, but the pace of sliding down the hill is slowing and for the market to maintain a healthy downtrend it needs to breathe, which means a correction up is imminent very soon. When indices will catch up on a positive note, banks will shoot up strongly and better to be early than late.
Cheers,

 

[rimtas]

Today NAB made an important new low which proved my thoughts about Intermediate size Triangle were wrong.
My stop was still not triggered(at 31.80) and today I just moved it bit higher to breakeven level at 32,17, so if it rises at open I leave as it is because other banks made no new lows and this is good especially for ANZ wave structure to stay bullish.

From there NAB could move either way but it already made me to look for exit as my profit loss/ratio (at least 1:20) is off the table.
One bullish variant I present at a chart below, but with All Ords moving strongly towards 4500 target I added an Alternative very bearish case under blue line.
On a Daily momentum is already showing signs of improvement, but as I do not have a clue how much it could rise and from where,I am not going to participate in this trade anymore until the wave structure present me with another good entry setup offering very low risk and high reward ratio.

Unfortunately that is how trading works and discipline is the key to success. I was hoping to Trade a thrust from a Triangle, market proved that it is not what I think and I will exit this trade as soon as possible.

Keep your stops tight or otherwise market will rip you off naked one day, that is a proven fact.
Cheers

 

[PennD]

It was looking weak a few days ago to me and thats why i asked if your still in.
Where is the wave 2 bounce in the asx i wonder? Maybe we had it already and 3 is about to come?
Cheers