Wednesday, August 15, 2007

Marathon Oil.....One to Watch

I have mentioned at length previously of my view that margin clerks are running this market. Whether it be the stock clerk or the banker who wants more collateral against the CDO's. This has led to the process of what Art Cashin has aptly called selling what you can not what you want. Hence the overt weakness in gold, silver, oil, et al. The areas of the markets that traders and hedge fund valets have some profits in. They know they should not sell their winners but in many cases they have no choice. I have encouraged many of you to be doing your due diligence or reconnaissance on what you want to own but for whatever reason missed. Marathon Oil is one such entity for me. Their recent purchase of Cdn Western Oil Sands only cements that idea. They now have a secure, viable supply source from a stable country, Canada. I will show you a long term (weekly) picture along with a short term (daily) so you can get familiar.

The weekly (above) shows a long term trend line in green which should offer some support around $45 area. We can and should expect this to be overshot, but remember this is not perfect science.

The daily chart (above) shows 2 potential we must recognize. The first is the development of a bear flag. The leg down forms what is known as the pole and the current rally(hilighted in yellow) is the flag. This is a very reliable pattern(according to Bulkowski studies). This would imply a move down to the $36-37. Crazy huh !
The second is what Elliott wavers would call a 5 wave down pattern. Jun-18-27 impulse wave 1. Jun 27-Jul16 wave 2 correction, Jul16-Aug6 impulse wave 3, Aug 6-13 wave 4 correction. with the final wave 5 down. Now I am not nor pretend to be an Elliott wave expert although I am arms length familiar with it. I have friends who are and I will check with them. I believe the wave 1 and wave 5 can have a 1:1 relationship which would invoke a target of $43.50 approximately.
I will now use this as a rough blueprint to follow Marathon. I love the underlying premise or story if you will and am a firm believer in 'peak oil' but I will not be foolhardy enough to let that override the charts. The great 'story' is a starting point but now that we have identified the target, we let the charts take over. Remember when someone tells you he is an investor we know better as investors are really speculators who made a mistake and will not admit it. Like Goldman averaging down, oops excuse me, investing with $3billion with their Alpha funds which are down 25-30%.
Keep your losses small and let your winners run. Good trading to you all.

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