Canada’s Bust is Coming

If you’ve been a subscriber to Boom & Bust since the start of 2012, you likely already know that the Canadian real estate market is a ticking time bomb.

I recommended betting against the country’s economy – via a short sell in the iShares Canada ETF (NYSE: EWC) – in our February 2012 issue. And while the position hasn’t accrued big profits just yet, this chart shows the potential gains you could grab in the event of a Canadian real estate collapse.

We think it’s a matter of “when,” not “if.”

See larger image

A few things to note…

First, the white crosshairs mark our Boom & Bust model portfolio entry at $29.10 per share on February 28, 2012. Since then, the share price has clearly not collapsed. Yet, it hasn’t shown any strength either. While the S&P 500 is up more than 18% this year, EWC is down about 1% after being underwater by 8% in June.

Looking ahead, I’m watching the $25 level closely. This price marks the neckline of the familiar head and shoulders pattern (green circles are shoulders; blue circle is the head).

Technical analysis says when this level is broken to the downside, the odds of a significant decline are very high. And, you can expect a drop, in this instance, of about $15 per share. That drop would put shares of EWC around $10.

Yet even a fall to just $14 per share – the March 2009 low – would offer profit potential of roughly 50%!

One thing is for certain: For every boom… there’s a bust!

Canada’s bust is coming.

What Killed the Middle Class?

Today real incomes of the middle class are 5% lower than they were in 1970 and 12.4% lower than in 2000… when they peaked! How could this be?

In our new infographic What Killed the Middle Class?, we take a look at some shocking numbers to show how bad it’s become and what has been fueling this middle-class revolt.

 

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Categories: Housing Market

About Author

Adam O'Dell has one purpose in mind: to find and bring to subscribers investment opportunities that return the maximum profit with the minimum risk. Adam has worked as a Prop Trader for a spot Forex firm. While there, he learned the fundamentals of trading in the world’s largest market. He excelled at trading the volatile currency markets by seeking out low-risk entry points for trades with high profit potential. An MBA graduate and Affiliate Member of the Market Technicians Association, Adam is a lifelong student of the markets. He is editor of our hugely successful trading service, Cycle 9 Alert.