Strictly: Drilling and oil-field services Message Board

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Gold/Mining/Energy : Strictly: Drilling and oil-field services

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To: marc chatman who wrote (52579)	10/7/1999 6:07:00 PM
From: SliderOnTheBlack	Read Replies (3) of 95453

Are we where the fundamentals overtake the technicals...? Imho; the technicals presently reflect the sentiment driven shift - which is mainly profit taking oriented; due to the year end for many fund managers and a bit of of a reaction from the expected technical retrace in crude prices. Perhaps some issues were a bit ahead of their fundamentals; but not that many & not that far ahead imo... I think that we are now at fundamental valuations in the driller & service stocks - given the near assuredness of $15-$18 Crude Oil; that will trigger strong buying very shortly. To retrace further than another 5-7% is nearly impossible in the E&P's because their earnings reporting shortly will lead to upgrades (which we've seen nearly accross the board this week!) and raised earnings estimates & price targets. The E&P's are NOT overpriced at all given even $2.25 mcf Nat Gas, or $18 Crude Oil here... The service/driller stocks are not quite equally as fundamentally undervalued; but given the price level comparison earlier of selected companies like HAL FLC & RIG; they are nearly at levels here; where we were at during the Crude Oil freefall last fall - looking $8 crude dead in the eye... these stocks will not retrace much further. I think the E&P's have potentially another 5-7% retrace here & the service/drillers have 10-12% potential remaining downside. Both sectors conservatively have 30-50% upside by year end. That 5:1 reward vs. risk ratio for the short term; is as good as its been in the last 12 mos imho. Personally I am nearly fully invested here - I will not chase small tics down; but will use margin (fully if need be) to average in at 2 more 7.5% retraces; and at 15% from here - I sell to meet margin calls. I am positioning myself to be potentially fully margined/leveraged at OSX 60 as my worst case scenario bottom; and I really do not anticipate 2 days in a row - closing sub OSX 63-65. That is not a leverage/risk profile I would suggest to anyone else; but fits my particular risk/reward tolerance. If we bottom over OSX 60 - I potentially "double" my upside here... not for everyone - but I see this as nearly a historic risk vs. reward point in the OSX. The price of crude & the fundamental valuations here scream for me to leverage into this bottom... gotta do it. In every single blow off on the prior trading ranges in the last year; we have had the shorts pile on & run the stops in the 2-3 days after a major volume led blow off. This is smart trading - given the amount of institutions that have been forced to the wall, the amount of margin calls; and the tight stops ususally set under a selloff of this magnitude. These final cleansings are actually a good thing. Today and through monday; I think we see the shorts test us. The API's next week will be a key catalyst. Give us a 2-3 Million BOE drawdown and we turn... crude just needs to level off here and we "bounce" 10%. Today in the E&P's I saw 2, of my 3 my "personal" sector indicator stocks of APA BR UPR; move up on nice volume. Only APA did not move positively and they had recent acquisition news...(APC also moved up today) I would watch HAL to close over $36/37 for a good sign that OSX issues have bottomed. I think we'll see a mixed bag of strong buying in individual stocks early next week. I think we will move solidly upward through the end of the year off of a continued support of crude over $22. I also still believe that we still see domestic storage levels continue to retrace significantly; and OPEC will maintain solid compliance triggering a temporary "bubble" that will move crude to the upper $27-8 range and an intra-day hit of $30 is going to happen imho. The trend in storage is clearly down, demand is going to most likely surprise to the upside; and I see nothing but outstanding fundamentals for crude prices through year end. We may not close the year at OSX 100, but we will reach that level prior to year end imho. It's pick your ponies time imho... Gary - out of curiosity; why are you not at least "averaging" in here ? When your technicals indicate a bottom, do you anticipate buying a complete position immediately, or averaging in on the move up off the bottom; as opposed to averaging down - into the bottom ? Curious as to what your thinking is there... Personally; I average into what I see as the bottoms; I can not force myself to "chase" prices upward (VBG)... Got GLBL ? Moving all the chips onto the table here... this is "THE" buying opp of the entire cycle since 1996 imho. Time will tell...not looking for any "line drives" here - looking for a 500 Ft' Upper Deck Home Run... because this is a 75 mph fastball delivered waist high & right down the pipe; if you don't swing for the fences in times like this - when do you ?

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