Year: 2010

BP, British Petroleum a buy ?

Hamilton

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.

BP march 27 2010 2 BP March 27 2010

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!

TSE = DAX

Hamilton

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.

TSE March 27 2010 DAX March 27 2010 2

DAX, March 27 2010

Hamilton

DAX march 27 2010

Here, using the DAX is the “problem “that we have right now:  as with the Can. Dollar the two legs down from the top are very similar which can mean two things; one, it is all one correction implying that the market goes back up fro a while ,or, two this is a 1-2 , 1-2 start of a major decline. As it is difficult to place a correction in the bigger picture I prefer the bearish outlook but at this particular point it may be worth standing on the side lines. Keep in mind that a 1-2, 1-2 sequence often look alike in their retracement levels which could mean that the Dax could return to the 6100/6200 level, before we even know where we stand. Here is the big picture; which would suggest that the rally from the lows from a year ago was an a-b-c X a-b-c, where both legs are equal in distance travelled but not in time. Three of these in a row is possible but IMO not very likely given the 62% retracement already achieved.

DAX March 27 2010 2

By the way, today’s continuation of the bull is supposedly due to vague statements from China with regard to their use of the Euro as a reserve currency.

HNO and HON, Horizons long natgas/short oil or visa versa

Hamilton

HNO March 26, 2010 HON March 26 , 2010

With the expectation that oil would come off the $88 or so level and natural gas would hardly budge this new product would be a great tool to play the game with a single trade , just make sure you buy the one intended, in this case HNO. I have no idea where oil will go next but after a $20 drop some rebound is not unlikely so I would exit the trade.

Fundamentally the trade  (is this a contradiction in terms?) to do is , of course , to buy the HNO and not the HON. The reason being is that the shale gas phenomenon has had a disruptive effect on the (always local) price of natural gas. This is not, according to the experts, a sustainable situation, in fact , it may be very short-lived as the shale gas depletion rate is extraordinary high. Oil ,on the other hand , is never priced locally (with a few exceptions like Venezuela, and some of the Arab states) and is destined only to go up if one believes the ex-chief economist with one of our banks. Ergo , over time, HNO should  go up as the ratio between the two energy sources gets back to a more logical thermal equivalent.

For the moment we are out and just keeping an eye on this.