This one has, as most every stock, has taken its time and a few extra dollars, but now it is clearly going into a downward direction. For a stock that is generally regarded as a “blue-chip” this may be a surprise to some but not if you consider that of the 18/30 original stocks in the DOW only one remains in the index, and it (GE) is trading at a fraction of where it peaked eight years ago.
When you combine the tar (bitumen actually) sands, with the China factor (PetroChina –the word’s largest corporation – has a 60% interest in certain projects) and all the machinations that often are associated with IPOs – this being the largest in 10 years!- you get a marvelous cocktail of financial magic, hype and predatory pricing. In this particular case the bloom faded the very first day. The question now is simple this – if ,at the time , investors were willing to plunk down 1.35 bln. dollars at $18 a share would this not be a reasonable buy at $11/$9 ?? Just because the value was cut in half does not necessarily make it attractive but from an EW point of view things are looking decidedly more attractive. The dive can be viewed as one large A-B-C correction - the only fly in the ointment being that the recent bounce of the lows does not ( yet ) look very impulsive. Here is the chart;
Raymond James upgraded the stock today, which may or may not be an indication of renewed interest in this company. The RSI and MACD indicators both suggest a bottoming of sorts and perhaps the problems with the Gulf oil spill may help to make this business look (relatively) cleaner and safer. Last , but not least, buying at 1/2 price fits the “buy low and sell high” mantra that, overtime , must be the single most important investment strategy. Regardless of whether or not the stock first goes to say $9, the target in EW terms, stays at about $15.
Now that the company seems to be making progress in shutting down their well in the gulf (Obama’s Katrina as Bush’s Karl Rove observed), is this possible a buy. The answer is YES.
The long term chart suggest that the top in 2006 was the real or “orthodox” top that was followed by a very nice a-b-c down precisely to the 62% level as is so often the case. After that the upleg could be 1. all of a counter-trend, 2. part (a) of a counter-trend, or 3. a brand new bull market. If 1 we would expect a move of about $10 up for wave 2 of c, if 2 a move to at least $61 or up about $16+ should be expected. If 3 the sky is the limit.
So, if in all three cases, it is reasonable to anticipate at least $10 or about 25% up it follows that this is a buy. Interestingly the rising costs of insuring this kind of activity will, in the future, only be doable for companies like BP, Shell, Exxon and the like, all other smaller players will be cut out of deep water drilling! Paradoxically BP may have strengthened its position by causing this mess.
Always use stops on these commodity plays!
By the way, the TSE and the DAX are still listening to the same drummer, just enlarge the two charts below and slide one next to the other. The a-b-c X a-b-c count is just a guess; in both the TSE and the DAX a rising wedge or “diagonal” could be fitted in even though that would make the 3d wave within the diagonal the shortest which should not be.
