All the drillers are herding south with the price of oil but I think oil is about to bottom and then double or nearly so sometime in 2016. The reason? Because it will be a 4th wave and the preceding 2nd wave was sideways. So the EW principle of alternation suggests that the next move will be a vee 4th and it should happen quickly so as to leave behind all those who are throwing in the towel.
I'll say one more thing: It's too early in the game for the remaining drillers to BK. The broader stock market hasn't tanked yet even though I think that the fat lady is warming up. I'll be more afraid for individual drillers if they bounce similar to the red path above but in 3 waves. That would be time to exit stage left.
2 comments:
Pick up some ATW today at $6
You might have been 1 day too early on this but you never know. In other words, I see the possibility but not the certainty of a HT forming there.
If that is a HT then the bottom would likely either be ~$5.70 or could be as low as $4.70 in a unicorn tail type situation.
But the word oversold doesn't come close to the pessimism that exists in this sector and I'm starting to like some of the resource plays even more than JNUG/NUGT because these things are behaving either as if they have almost zero book value (which couldn't be further from the truth) or that BK is eminent for the whole sector which we know is not going to be the case and in the case of plays like ORIG we know they still made money last Q and still plan to make money this Q. The smart ones who still have positive cash flow are buying up their debt at panic prices. ATW just gave very positive guidance. Even though the market found a reason to sell them off, the key point is that I do not think they will BK any time soon and so building a position into capitulation is a fine thing to do. It is what I am doing and have been doing.
What's happening here is margin calls, pure and simple. Everyone loaded up on energy share leverage because $150 oil was going to be $300 soon and the dollar was immediately going worthless. Now those same sheeple are running away as fast as they can before the whole sector is worth zero. It's amazing to even watch happen. But this is the EXACT volatility that Greenspan warned us would happen and that I also foresaw in the end days of the global debt Ponzi.
Volatility cuts both ways. This is the times to be loading up on oil services and I also have a valid termination count in place for JNUG/NUGT. I noted that DRD is actually up 10% today...
We will know that the materials recovery is on when these begin moving up in unison. The 5th "up" wave of the dollar still has not completed according to EWI but I see a count whereby the herd could indeed say it is complete. If UUP breaks current support you can bet that materials are going to respond to the upside and very rapidly in percentage terms at that.
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