MERRY CHRISTMAS everyone. Finally found a place to log on and this board is full of new people. Both my fear and hope appeared to have come true this week.
First is my fear of irrational panic selling in thin market - confirmed early this week. We had made lower lows each and everyday for the past week. I agree that the hedge funds have something to do with this apparently bottomless sinkhole theory. Soros alone (and with his closely guarded inside circle) is big enough to bring down the currency of Malaysia, or so alleged by Dr. Mahathir, so the theory of a few hedge funds playing yo-yo with the drillers is very conceivable indeed. However, it is important to focus on the reality (stock price) and flip through explanations (apparent rationale) as afterthoughts.
Second is my hope of small investors beating the big funds to the doors in snapping up the Post Christmas clearance drillers stocks - not yet confirmed by all means but Wednesday's roughly 10% intraday bottom to top swing is very impressive. Though the overall volume is not very high, but as a percentage of the overall market volume the drillers volume is impressive. I watched about 2-3 hours of tapes on a boring Wednesday morning in a hotel room in Vancouver (now I realize why there are so many Canadians watching CNBC) and the drillers symbols clearly dorminated the day's activity. Analysts are complaining of a weak Christmas sales, but the reality is today's consumers are more thrifty and realized the best shopping is found AFTER the Christmas. I thinkt there is a parallel here as well.
Just checked the Stochastics and BB and it is clear that the long Stochastics is oversold on every driller and a lot (if not most) of the drillers bounced off their intraday lows from the lower BB support. We absolutely need a follow through on Friday, another shortened sessions, to get a better sense of whether we had hit a bottom here. The charts somewhat reminded me of what happened on Dec 1 when we turned the short-term bottom and had one good week of rally. The difference is we had corrected 10-30% more since Dec 1 and we are also closer to 1998. The stage is set for a POSSIBLE repeat of the Dec 1 bounce (which I called dead cat bounce plus a little tail wiggling). We know for sure the fund managers are not net buyers the last few weeks. They have indicated on numerous occasions and by different people that they WILL buy in 1998. The question becomes will this apparent rebound (if it can continue from Wednesday's close) continue and reverse the 10 week bear market from here on out.
After Friday we have three more days of trading before the New Year and the activity on this span of time will be very telling on the immediate direction going into January. What would make a bull case for the turning of the bottom corner?
1) a follow through from Wednesday and a gap up (almost certain) on Friday (tomorrow).
2) at least 4-5% gain across the board by close Friday.
3) Relatively large volume on next Monday through Wednesday with an average gain of 10% across the board by the close of 1997's book. (There will be some tax loss selling but if the momentum is there this will simply become stock switching and no net sell).
If we don't have any gain on these three days then the trend will become more muddy. I don't see why the fund managers will want to wait any more than the second week of January to get in for 1998 unless they are bears or neutral. From all the sources we can find the general consensus for 1998 is overwhelmingly bullish for the drillers despite the Asian, middle east, etc. worries. Hedge funds are also great momentum generators. For a good spirit Christmas thought (and wishful thinking definitely), the upside potential from here is like holding the last 2 month chart upside down and left side right. If this doesn't work, print a yearly chart and just cut out the lost months after October, 1997.
In the event we do see a corner turner here, I would definitely want to trade actively to both protect profit and follow the momentum. There will be sharp profit taking along the way because people remember the last 2 months very well. The key is the overall trend. Once we are back on the uptrend, life will be a lot easier. When will the earning season start for the drillers in January? Mid January??
Thanks all for sticking together the last 2 months and we owe it to ourselves to post a list of learning's from our experience when the trend turns. This should be a very good learning opportunity for many years to come.
ps: Carl - thanks for sharing the forward growth rate for the deep/shallow/land drillers. They are useful but need to be updated I feel. IMO, the deepwater drillers have the least risk but the land drillers have the most upside potential simply based on the magnitude of the recent price adjustment. If we get an uptrend from here, it will be irrational and momemtom-driven very much like the reverse of what we have recently. |
