[CJES] update

Reader TJ brought up the subject of CJES and so I will do a post on it.  But first, please understand, these posts are not stock "recommendations".  That would imply that I was investing based on fundamentals.  Instead, I post models which show expected behavior over time.  In many cases I freely admit that I don't know jack shit about the underlying company and I don't care because I am not "recommending" anything.  I'm just trading a particular chart pattern.  I know this is way different than the "trust me" approach of wall st and all financial advisers.  But then again I think they are con men.


I try to be very clear about this position.  For example, here is my first post on CJES.  In it I wrote,     " It could very well BK before the unfolding crisis is over but it is still too early in peak credit Ponzi for it to BK yet.  If it does go under it will be because $20 mn of cash is backstopping $345 mn of debt used to ramp up its now unprofitable fracking operations.  Right now emotions are running high due to the rapid oil price decline that has occurred.  The only defense we have against being blinded by these emotions is the price chart and the application of EW models!  And so below is the one for CJES which, if not already bottomed, is very near one. "

First off, clearly I was not "recommending" a company which I called a highly leveraged company which could BK!  So folks, please remember, you are reading a very unconventional blog here, miles away from Seeking Alpha, etc.  Those people fall in love with their own analyses.  I just interpret what I think the chart is telling me.  In that particular post I provided the model below.  In conjunction with that chart I wrote, "So maybe it goes down to perhaps $11.50, bounce s a little and then maybe as low as even $10.50 before it is really done...When oil climbs back up, CJES will climb back up even faster due to its inherent debt:cash leverage.  I think it will a-b-c into the @20-$22 range within 6-8 weeks.  I can't say more than that until I see how its chart plays out but if you like the oil patch then this chart is telling me that it is time or very nearly time to flip long."

Yellow and blue highlights above were added just now for emphasis.



What actually transpired is below.  The bottom fell about $1 lower than expected and the subsequent peak turned out to be a rising wedge which also took longer to peak than expected and also fell about $1 short of expectations but I think it's pretty amazing performance for this business of predicting the future.

 

As more data came in I continued to modify the model.  Remember what I wrote in the very first post: "I think it will be a-b-c...I can't say more than that until we see how the chart plays out".  So the expectation from the start was that this was a trade and not a long term buy.  In this subsequent post, I clearly pointed out that I thought a rising wedge was forming.  Here is the model from that post:



If you are new to the blog, W3 followed by red 4 is clear.  It implies that wave 5 down is coming and the primary expectation here should be that a lower low will soon arrive.  True to the model the current chart shows that CJES has lost almost 75% of its market cap since it topped very close in keeping with my blue target zone above.  If it were anyone making these calls except an EW analyst I would characterize them as miraculous.  I'm not trying to be braggy here.  That is simply the straight up truth.  I myself have never seen the Jim Cramers of the world call the turns in near real time like this.  And while I do have some insight and experience in EW I freely admit that I am just following the rules of herding behavior which were documented by R.N. Elliott a long time ago.



So where do we go next?   Well, I think we have to play it wave by wave.  As I said before, these highly leveraged frackers could easily go BK before this crash is over and folks, the credit stress really has not begun yet.  When JNK is in freefall, that is when we will, as Buffett says, know who is skinny dipping.  The only thing I claim to know is where the chart is with respect to its EW count.

Clearly CJES is in near freefall.  Panic is high in the oil patch right now and many good babies (like ORIG) have been thrown out with the fracking (no pun intended) bath water.  ORIG makes money the old fashioned way.  Frackers are super highly leveraged opportunists and a credit crash will literally wipe out the entire sector.  They have hundreds of billions of loans out right now, perhaps more than a trillion.  EASILY enough to wipe out the US banking system if all are allowed to BK.  So I suspect that the fed will find a way to help them at the expense of everyone else because job one for the bankers is to protect the banks in the name of protecting us all.  Of course that kind of protection is nothing more than the new twist on the old protection racket scam practiced by old school mobsters and wise guys.

In any case, my count for the decline from $18.50 down to the low 5s is shown below.  2 was sideways so 4 was a vee (EW alternation).  W3 happened just before black 4 (CWT).  $5 will likely be support and if this occurs then the bounce will likely be to $10.  That's a double folks.




Zooming in to just what I have labeled as black 5 above, I can see a count where the current wave is potentially only red 3 of black 5.  So this is a case where you want to be able to count a five wave move as complete and then spec buy WITH STOPS.

I've written many times that even perfectly counted EW turnout to be wrong simply because the herd has options to extend a wave and that cannot be known for certain in advance.  The herd has options in real time folks, EW is NOT a crystal ball.  Don't be lulled into thinking it is simply because many of the models turn out to be right.  The minute you fail to use stops at EW defined levels, the market maker will take your money.

In any case whether it is red 3 that the next bottom forms or red 5, a nice bounce should be coming off of the $5 level.  At least it will likely be per the blue model below, but it could also move back up to the $10 level (level of prior 4th) as mentioned above.