Ed,
I'd like to stick with your analysis and assumptions and make an attempt at trying to see if technical analysis will support your views. I'm going to take a very simple approach because simple often works better for me than trying to be too smart.
The Stochastic indicator is a tool that tells us if a sector or stock is overbought, oversold or somewhere in between. When the Stochastic indicator is above 80, it's telling us that it's overbought. When it's below 20, it's telling us it is oversold.
I don't use this indicator for buy and sell signals, although a lot of people do. I use it to tell me where a position sits at any given time. When I see an overbought situation, I start to look for confirmation that we'll see a pullback, or if we will see additional buying, supporting a breakout.
I have frozen the accompanying chart in time, as of three weeks ago, when the XNG hit a recent high at 173. Take note of the Stochastic indicator. The solid black line is your signal line and it sits at 95.28. Very overbought.
stockcharts.com[h,a]waclynay[d20010209,20030118][pb50!b10!f][iut!Lh14,3]&pref=G
The next week we had the first of the 200+ draws and the XNG dropped in price. As we look at the next chart, there are a couple of things to ponder. First, the Stochastic has turned down and the black line (your buy or sell signal) has crossed over the red line, flashing a sell signal for those who use this indicator for buy and sell decisions. The Stochastic is now sitting at 89.45. The second thing I want you to notice is the 50 week and 10 week moving averages. The 10 week moving average is rising up to meet the 50 week moving average. The 50 wma is a major level of support. "MAJOR."
stockcharts.com[h,a]waclynay[d20010209,20030125][pb50!b10!f][iut!Lh14,3]&pref=G
Now let's bring it up to date. Three 200+ draws later and we still have a falling XNG. The Stochastic has clearly flashed a sell signal by dropping below the 80 line, it's major level of support. However, and "THIS IS IMPORTANT," the XNG is approaching the 50 week moving average at 154.88. The 10 week moving average has moved up to meet it at 154.37, which should provide additional support.
stockcharts.com[h,a]waclynay[pb50!b10!f][iut!Lh14,3]&pref=G
The XNG at 154-155 will tell us to fish or cut bait. If the fundamentals for NA NG are as strong as you, Russ and Que say they are, this is where it will show up. If the fundamentals are to support the E&P's over the next 6 months, you won't see the XNG fall more than 3-4% below the 50 week moving average. If it does, the market is telling you that the disconnect is going to continue and anyone still holding on to the hope that things will get better, are going to lose capital before they can be proven right. And, what good is it to be right if one doesn't profit from it?
Anyway, even the most ardent fundamentalist should learn to use some very basic technical indicators. Overbought and oversold ranges should help one time their buys and sells a little better, especially on the weekly charts since they are longer term. It's also important for those who rely on FA to know where major levels of support and resistance are. Even though they may not want to rely on TA to help with their decision making process, it would be very helpful to know where others are going to buy and sell, who do.
The XNG is at an inflection point. This is the week, in my opinion, that either supports your views over the coming 2-3 months, or it tells you your timing is way off. Either way should be helpful to you in looking forward.
XNG 154-155 is the key. Since we're using a weekly chart, the XNG must close above this support level next Friday.
dabum |
