Month: December 2014

COP, ConocoPhillips

Hamilton

cop dec 5 2014

Google has some very nice charts and they use daily highs and lows rather than monthly averages. If you do this chart on BigCharts the most recent top is actually higher than the one in 2008. In any event the story remains the same.

We have been pretty dead on with our call that the integrated oils like RDS, CVX, XOM, BP etc. would take a big tumble. COP’s chart promises more of the same. First there is this accepted notion that, over time, things have a tendency to revert back to the mean. This is effectively saying that the extremes, highs or lows, should be faded to get a more linear progression. In this chart we ignore the statistical niceties and simple eye-ball  where the mean is and draw that line in pink/purple. If we were to fall back to that level, or even a bit beyond as the pendulum never stops dead centre, no one should be the least bit surprised. Oddly, they already are.

     In EW terms we have a 5-wave sequence up. Where exactly one wave ends and the next one starts is debateable but in the big picture it is clearly there. From the top in 2008 (or the orthodox top in 2007) we started what looks like a very large “flat”. As the word suggests, superficially at least, a flat is flat all though in practice the second drop, wave C, typically ends below the first, wave A. As it happens – and not entirely by coincidence – this is also the level where wave 4 of the  30-year up move resides, a normal retracement target.

     As always with EW the question that begs an answer is what could go wrong. One possibility, is that the “flat” starts consuming even more time by morphing into a triangle. In that case the A-B-C would develop further into an A-B-C-D-E to form a triangle. In that event we still need at least another $20 down from here. Ergo a sell in any event.

    For connoisseurs it is important to note that this stock actually trades nicely in tandem with oil, the commodity, itself. Both correlate well to the stock market as well.

FXE Euro/US$ exchange rate

Hamilton

FXE dec 5 2014

Compared to the Yen this slide is nothing. Even so , if you are selling BMWs or Benzes it does help quite a bit. If you are drawing a pension from Europe while living here it is less fun. Things will change soon at about 1.20

IBB, IShares Biotechnology.

Hamilton

ibb dec 4 2014

We have been wrong on this ETF before, but the count is now a perfectly clear 5-waves up sequence. In any event the chart stops at $320 so the stock cannot go any higher! This ETF consists of 125 different pharma and bio stocks, most of which you have never heard of. It earns a whopping 0.07 % per annum dividend (you have to own it for 30 years to get the same yield as you do in one year on a ten year bond). 39% of the stock is held in short positions so we are not alone but we do not suggest going short. We would rather buy a put. A 275 strike , March 2015 is going for about $10 and could, repeat could, easily be worth 10 times as much. Be prepared to do this a few times or alternatively start with a longer option. The expression “If at first you don’t succeed, try ,try again”  was first coined on the Amsterdam exchange in 1632 in the context of the cherry options trade, where more than 31 different varieties traded as “privileges” as they were then called.

COS, Canadian Oil Sands

Hamilton

From the past, Feb. 2013 we repeat the entire blog;

cos from feb 5 2013

At the time we figured a target of about $10.50 would be reasonable. Today we got to within 20 cents of that but it took a lot longer than we expected. In any event , at that time, we brought up the distinct possibility of “stranded costs”. For those of you who do not know what that is, I suggest you look at your Hydro bill. Euphemistically they refer to the same thing as “legacy costs”, which is to say that they screwed up but still get to charge you. COS is not a government entity with the monopoly privileges attached, instead shareholders pay. And pay they will as this has further to go.

cos dec 4 2014 bcos dec 4 2014 s

In the big picture – this is a semi-log chart -  we are in wave 3 of C, normally the most powerful part. 3 can go lower as  if we use the gap in the middle approach it would target about $7. From that point on we would still need 4 and 5 of C to complete the whole thing. Or alternatively, another b and c if we are in fact looking at a double zig-zag. The realities of being a marginal producer in an environment where demand is lagging and supply has increased dramatically are beginning to come home to roost.