Post by TradingForGod on Sept 13, 2004 19:55:50 GMT -5
I got replies back from Grambo and MinaMultiplier asking that we look at some Canadian royalty oil and gas trusts. There are several out there, but I am going to focus on Primewest Energy (PWI). The chart below shows PWI’s trading activity so far this year. You can see that it bottomed out in early May and has rallied well since then. The rally has a very characteristic “wave pattern” to it. While there are many possible interpretations of the wave pattern, I think the most likely one is as follows:
The initial rally from the spike low at 15.35 to 17.825 (2.475) completed “Wave 1”. This wave is probably bigger than it really should be because it looks to me like the sell off on May 10th overshot the market by about 65 cents. The correction back down to 16.70 (1.125) completed “Wave 2” and corrected 45% of the initial rally. This is not a Fibonacci ratio, but they aren’t always perfect. From early June through mid-August, PWI rallied in five clear waves (3 up and 2 down). I think this entire rally was actually “Wave 3” of the large advance and it sub-divided into smaller “wavelets”. Remember from our discussion of Elliott Wave that wave patterns can be imbedded within wave patterns…they have fractal characteristics. The sell off into the end of August was “Wave 4” and we are now working a “Wave 5”. The target of this wave is somewhere between 20.25 and 21.50 depending on whether the rally extends or not. That’s a long drawn out explanation to say that the rally is just about over…I think.
There is a decided cyclical pattern to the advance as well. It was not as apparent during the sell off, but on the way back up there are relative lows around the 29th of each month. The pattern is VERY strong. So we should be nearing the mid-cycle high over the next few days here. This is another reason to think prices may be topping out. In addition, the stochastics are extremely overbought and prices are up against the daily Bollinger band. That is not a big issue because of the relatively strong daily uptrend. HOWEVER, PWI is also at the WEEKLY BB and there is no trend on the weekly chart. I think this is potentially a very powerful sell signal.
Putting it all together, it looks to me like the uptrend in PWI should be coming to an end pretty soon…perhaps NOW. If that’s true, we could see this issue slip back to the August low at 18.425 pretty easily with further weakness down to near 17.00 a possibility. Given the daily uptrend that is all I can call for at this point. If you are long this stock, I would look to take profits right now anticipating an opportunity to reset near the end of this month at lower numbers. How much lower is not yet clear.
One final thing…I have included the chart of the Canadian dollar. Look familiar. It should. It looks just like PWI. Much of the sell-off and following rally in this issue is due to the fluctuation in the exchange rate. If you are trading this issue, you really need to have a point of view on currencies as well. Otherwise, you can have great fundamentals in the stock completely overwhelmed by a currency move that goes against you. Just something to think about.
God’s richest blessings to you all,
TFG
p.s. PGH and PTF are variations on this same theme. BPT, however, looks completely different. It looks just like a crude oil chart, bottoming in 1999 and peaking just a few weeks ago with a corrective dip since then. If you think WTI is going higher, own this. If not, then sell it. It's that simple...I think.
The initial rally from the spike low at 15.35 to 17.825 (2.475) completed “Wave 1”. This wave is probably bigger than it really should be because it looks to me like the sell off on May 10th overshot the market by about 65 cents. The correction back down to 16.70 (1.125) completed “Wave 2” and corrected 45% of the initial rally. This is not a Fibonacci ratio, but they aren’t always perfect. From early June through mid-August, PWI rallied in five clear waves (3 up and 2 down). I think this entire rally was actually “Wave 3” of the large advance and it sub-divided into smaller “wavelets”. Remember from our discussion of Elliott Wave that wave patterns can be imbedded within wave patterns…they have fractal characteristics. The sell off into the end of August was “Wave 4” and we are now working a “Wave 5”. The target of this wave is somewhere between 20.25 and 21.50 depending on whether the rally extends or not. That’s a long drawn out explanation to say that the rally is just about over…I think.
There is a decided cyclical pattern to the advance as well. It was not as apparent during the sell off, but on the way back up there are relative lows around the 29th of each month. The pattern is VERY strong. So we should be nearing the mid-cycle high over the next few days here. This is another reason to think prices may be topping out. In addition, the stochastics are extremely overbought and prices are up against the daily Bollinger band. That is not a big issue because of the relatively strong daily uptrend. HOWEVER, PWI is also at the WEEKLY BB and there is no trend on the weekly chart. I think this is potentially a very powerful sell signal.
Putting it all together, it looks to me like the uptrend in PWI should be coming to an end pretty soon…perhaps NOW. If that’s true, we could see this issue slip back to the August low at 18.425 pretty easily with further weakness down to near 17.00 a possibility. Given the daily uptrend that is all I can call for at this point. If you are long this stock, I would look to take profits right now anticipating an opportunity to reset near the end of this month at lower numbers. How much lower is not yet clear.
One final thing…I have included the chart of the Canadian dollar. Look familiar. It should. It looks just like PWI. Much of the sell-off and following rally in this issue is due to the fluctuation in the exchange rate. If you are trading this issue, you really need to have a point of view on currencies as well. Otherwise, you can have great fundamentals in the stock completely overwhelmed by a currency move that goes against you. Just something to think about.
God’s richest blessings to you all,
TFG
p.s. PGH and PTF are variations on this same theme. BPT, however, looks completely different. It looks just like a crude oil chart, bottoming in 1999 and peaking just a few weeks ago with a corrective dip since then. If you think WTI is going higher, own this. If not, then sell it. It's that simple...I think.
