We have had an $8 target for this stock for quite some time (see previous blogs). That target may turn out to be just a little bit too low for now. Here are the charts again;

The 4 year flat pattern does suggest $8 or thereabouts. However a trend-line connecting the lows would presently run a little higher, more like $10. I cannot get stockcharts for more than 3 years and consequently the A-B-C shown missis the real low in late 2008, but the picture is nevertheless pretty clear. The count for the down-leg not entirely. 5 waves could already be complete and we are now in a b wave to be followed (at the very least) by a c up to around $15. Looking closely at that last leg, it could also be a diagonal 5th with much the same results;

You can buy the stock now in the knowledge that it should go to $15 either way. Or you can chose to be patient and wait for it to drop to $10, perhaps even $8 and then watch it go to $15. Obviously you run the risk of missing the proverbial boat. The stock has a book value of about $10 and is down 50% this year. It has a beta of 1.5 so it listens mostly to its own drummer. Suppose that you do buy now at $12 and the stock drops to $8. By that time it will have dropped about $16 in a single move. Typically a rebound would then take it up about 38%, or $6 which would still leave you with a gain of $2 or about 16%. Pick your own poison.

In July when the stock was about $19 we predicted a drop to about $8 based on a simple EW pattern, the “flat”. Here it is again;

Relative to the stylized flat drawn in the chart, the drop is a little slow but has already gotten close to $11. Notice that there is no correlation between the price of oil or gas and the stock price. Last time it reported production up 10%, cash-flow up 29%,earnings from operations up 38% and net income up 48%. So why is the stock down 50%? The waves??

Talisman is a good example of a B-wave correction. In this particular case there is no mistaking the 3-wave nature of the correction from the Nov. 2008 lows. This one hit the lows early compared to most other stocks and perhaps it started the trek down earlier as well. There are still possible counts why this stock does not have to go straight down as in a “flat” , the most likely pattern. We could be forming a huge triangle for instance, but until proven otherwise , it is fair to assume that this stock will drop to just below $8.

I have tried to avoid being too opinionated on either gold or energy simple because I think we may be entering a deflationary environment, and , I do not understand what is going on. Now I know that that does not stop your average broker from telling you what to do, but then I am not interested in being an average broker. Anyway lets look at the E-wave position on this stock. It is 5 down from the top, then an a-b-c correction back up (there are no 5-waves, a lot of overlap and we have retraced about 1/3 already) which may have a dollar or two to go further but that is about it. Right here it is not a buy as best as I can tell.