COP, ConocoPhillips

cop dec 5 2014

Google has some very nice charts and they use daily highs and lows rather than monthly averages. If you do this chart on BigCharts the most recent top is actually higher than the one in 2008. In any event the story remains the same.

We have been pretty dead on with our call that the integrated oils like RDS, CVX, XOM, BP etc. would take a big tumble. COP’s chart promises more of the same. First there is this accepted notion that, over time, things have a tendency to revert back to the mean. This is effectively saying that the extremes, highs or lows, should be faded to get a more linear progression. In this chart we ignore the statistical niceties and simple eye-ball  where the mean is and draw that line in pink/purple. If we were to fall back to that level, or even a bit beyond as the pendulum never stops dead centre, no one should be the least bit surprised. Oddly, they already are.

     In terms we have a 5-wave sequence up. Where exactly one wave ends and the next one starts is debateable but in the big picture it is clearly there. From the top in 2008 (or the orthodox top in 2007) we started what looks like a very large “flat”. As the word suggests, superficially at least, a is flat all though in practice the second drop, wave C, typically ends below the first, wave A. As it happens – and not entirely by coincidence – this is also the level where wave 4 of the  30-year up move resides, a normal retracement target.

     As always with the question that begs an answer is what could go wrong. One possibility, is that the “flat” starts consuming even more time by morphing into a triangle. In that case the A-B-C would develop further into an A-B-C-D-E to form a triangle. In that event we still need at least another $20 down from here. Ergo a sell in any event.

    For connoisseurs it is important to note that this stock actually trades nicely in tandem with oil, the commodity, itself. Both correlate well to the stock market as well.