It has happened a little faster, we are now well above $16 and have left a small gap on the open. Luck favours the brave, so sticking to our target of $23 may be the most beneficial strategy. The $23 is the normal target after a diagonal, it is very reliable . Perhaps it might even go higher but we would certainly not want to outstay our welcome. Both RSI and MACD are pointing to an imminent turn.
This chart is from the G&M. It does not include today’s action. The stock is now at $14.79 at the time of writing. Just in case you missed it, the stock is worth about 1/10th of what it was at the 2007 peak and is trading below the 2009 lows. What is worse is that of the two plausible EW counts, both have a way to go as we are either in wave 3 of C in an A-B-C, or we are in a 3d wave of c in a double zig-zag. Both have quite a bit further to go.
DB does not like further easing, here is what they said;
Deutsche Bank has expanded its war against the ECB to include the BOJ as well, and in a note titled "The Risks From Further ECB and BOJ Easing" it wants that with the Zero Lower Bound already breached in nearly a third of global markets, the benefits to risk assets from further easing no longer exist, and in fact it says that while central banks have hoped that such measures would "push investors out the risk spectrum" the "impact has been exactly the opposite."
Now that is refreshing. DB is in trouble. They have a large derivative book. Larger than AIG had and larger than JP Morgan. In fact it is the world’s largest at about 70 trillion gross, that is more than 20X Germany’s GDP. When it comes to gross or net the difference quickly becomes irrelevant after a first default. It is the asynchronous easing by the ECB and the BOJ relative to the Fed. that is pushing the dollar up, oil etc. down and CDS’s (Credit Default Swaps) closer to the edge.
By the way, as of today the DAX is down 27% from the peak set back in April!
We have had this count now for at least three years. This is a fascinating company. As the name implies they are precision drillers and not a bunch of wildcatters that poke holes in the earth. They are the largest and operate in Canada and the US but also elsewhere in the world under the name of Grey Wolf International.
The EW pattern seems to be relatively clear. Going into 2009 we have a beautiful A-B-C correction that is almost certainly complete. After that a first wave up which is then retraced by an a-b-c down retracing, as is often the case, almost the entire first wave. Now we should be ready to launch wave 3 up of a new bull.
In the US there are roughly 500 rigs operating out of 1600 at the peak. In Calgary older rigs fetch little more than their scrap value. But shale wells do not last very long, so either production will decline causing prices to increase, or new wells will have to be drilled. These guys work on contract which is much better than doing it yourself with all the capex. They are very leveraged to oil. If you want to add some convexity to your portfolio this stock with a beta of 2.77 will get you started.
If you prefer to fish closer to the bottom there is also TDG, Trinidad Drilling. It has a different count but the similarities are nevertheless pretty obvious;
Their HQ is in Calgary, not Trinidad. See also an earlier blog. Do not confuse this stock with TDG on NY!
On the left, we called for a top just about a year ago at $78, give or take. It immediately plunged about $30 or almost 40%. Then we looked for a rebound to about $65, it went a little higher (see all blogs). Here we are having completed either waves 1 and 2 or A and B. Next is 3 etc. or C. The 4th wave of previous degree is around $25. You just cannot take the chance! Here is the rebound illustrated to save you time, this was as of Sept 2015.
