This chart is 3 weeks old. Many charts were warning that contrary to the consensus oil was going to go down, perhaps even a lot. Individual energy stocks were saying the same. Today,despite a very large drawdown of inventories the stuff dropped right on cue to form (the start) of the thrust down. Here is the chart;
This is most like the first $4 down, it should go a lot further.
See April blog, first stop $8
Everyone that owns stock should own some of this stuff. Since hitting lows of around $7.80 in March and April the HXD has gradually worked its way up, a break-out if you wish, to the present level of $9.36, up about 20% against a market that is down about 10% so it tracks as advertised by 2 to 1. This is a great hedge!
Why hedge? Why not just sell the existing position? The answer is that your broker truly knows what he is doing and therefore his picks will outperform the market, so you want to keep them while you want to reduce your exposure to the market overall. Tax and commission considerations may play a role as well.
This was our canary-in-the-mine stock and we got out a while ago around $19 or so. So far the little bird has not regained its composure and things could get ugly quite rapidly All waves since the lows of March ‘09 appear to be 3-wave affaires indicative of a triangle (potentially at least). If that is the case, the stock will be pulverized. The triangle measures conservatively $15 at the mouth. Now suppose the e-wave of the triangle were to start at around $16/$17 , then the target would be $2 at best! Before that does happen arrangements will be made for a merger or take-over. After all , the address on Bloor street with its immaculately kept lawn is probable a prize asset for any predator.