TLM, Talisman again for EW-ers.

tlm jan 2012 fine

Here we have 30+ years of Talisman Energy. It is very helpful to look at long-term charts as sometimes certain predictions that seem ludicrous or preposterous,  if you look at just one year or so, become quite reasonable and acceptable if you widen your horizon.  First of all, notice that the stock does very little the first 12 years, starting and ending at about $1. Oil was twice around $10 during this period and ultimately shoots up to $147+, or about 14x. This stock correlates well and even does a lot better doing 23X. This happens mostly during the 5th wave which, at least for commodities, often is the longest and strongest move in contrast to stocks that usually do this in wave 3. The $11.70 where the stock is now, could be the termination point for the “flat” correction over the past 5 or 3 years. However, and here is example, there is a problem with that;

flat

The basic structure is a 3-3-5 A-B-C. The B tends to exceed the starting point of A and then the C tends to drop below the of A. This last thing has not happened yet!. Furthermore we have not yet reached the 61% fibo level either. Next, if you happen to believe in the regression to the mean concept, we still have a little more to go. $8 would get us back into that channel.

On top of that there is a whole body of literature about “double-retracements” in the wake of extended waves. Without boring the reader to tears, suffice it to know that often extended waves are retraced to the top of wave 1 of the extended wave, arguable at $8 here as well. The beauty of all this is that once you reach the low , a 38% rebound is almost a minimum expectation (see blue arrow). That being the case you presently have a risk-free trading opportunity, provided you are willing to wait, say, a half year. The minimum return would be about $3 or 20%, which, annualized equates to $40%. The potential is for much more, either as a result of getting the stock cheaper, or having a larger rebound.

TLM Analyst Opinion  Talisman Energy Inc

As always, you are on your own, but in good company according to Thomson/First Call !