We got the early pullback and then up a whole dollar. We would expect this to be repeated tomorrow.
Month: April 2012
XNG Arca Natural Gas index and ECA Encana Corp
We were not aware of its existence , but there happens to be a Arca Natural Gas index, a misnomer to be sure as it does not keep track of the “stuff” and instead purports to track 18 stocks that are supposedly (primarily) in the gas business. Here is the group;
One could argue that some of these are not primarily involved in gas, or like Transcanada only involved in the transmission, but we are not looking to change the world. Our objective is to show, that on a relative basis at least, Encana is indeed a hell of a buy. Here are both charts side by side;
I can only get 3 years on this chart service , but that will do. Notice that the chart on the left goes up from the lower left to the upper right, approximately doubling in the process. The chart on the right (ECA) does pretty well the opposite losing 1/2 of it’s value. So there is an anomaly to the tune of a factor of 4. Q.E.D.
CHK, Chesapeake is , of course , far more representative of what a pure (not quite as there are a few nefarious things going on there) play gas producers has been doing. Like ECA it has lost more than half it’s value but it too might be a buy at these levels:
SNC Lavalin update
So we got the 5th minor wave as expected to finish of wave C. As a result we have a perfectly symmetric structure within the blue circle shown above. I have absolutely no idea what that all means except that has a tendency to expand in time. My guess, and that is what it is, is that we go up to about $43 and then back down to somewhere in the order of $32
ECA Encana update
A week or so ago it looked like natural gas was, perhaps, bottoming. Earlier we recommended ECA, albeit tentatively, as a buy simple because of the upside potential (see earlier blogs). Here are the charts;
Back in December it was still possible that the wedge structure that was still unfolding could have taken the stock to as low as $15. It did not do that and stopped in the $17+ range. Since then it has been a rollercoaster , most probable a wave 1 up followed by a (very normal) deep wave 2, which means that we are presently in 3. The alternative would be a corrective a-b-c rebound than must , in any case, go to $22 (wedges are almost always fully retraced). Given the clear count this alternative is not at all probable. Considering that this entire C wave started at $34 and ended roughly at $17 it would not be surprising if the first bull-leg up would travel at least 38% of that which is $6.50 which would take the stock to $24. A very common next target is wave 4 of 3 (a triangle) which would take the stock to $26.
If there is a slight pull-back Monday morning this is an excellent buy for a gain of 10 to 20% with very little risk.