Monday, November 27, 2006

2006 - Building a base.

Quote from

"If you're on the right side of an issue, just keep driving until you hear breaking glass. Don't quit."

I was reviewing a number of charts from the energy sector last night. [For charting, I like to use I generally add Full Stochastics which highlights short term moves a bit more overtly than RSI, put the size at Landscape, and first view Daily data and then Weekly to see the longer term trend.]

My thoughts: 2006 was generally an all over the place year. Some stocks are up on the year, some are down, some are roughly flat. There were a couple of large moves over the year in each direction, but 2006 was a significantly weaker year compared to either 2004 or 2005. However, I think a period of consolidation after a very strong couple of years is both to be expected and healthy. [Somewhere I had guessed that 2006 would be rough, but I'll have to add the link later, as I can't find it right at the moment..] In terms of a driving factor for this off year, obviously the questions about the economy and oil and natural gas prices that came off the boil played a major role, even as many companies in the energy sector reported record profits.

So what's in store for 2007?

As I was reviewing the charts, my impression was that the energy sector is fighting it's way back, some stocks to their highs for the year (and multi-year, or all time highs), others back towards the top end of their trading range, some to flat, and others are still trading below water for 2006. But I would say this is not a sector that has thrown in the the towel, even after a couple of serious downdrafts during the year. I don't know when the long term uptrend resumes, perhaps it did in October, perhaps it will in 2007 or 2008, but I think the uptrend will ultimately resume. [Why throw 2008 in there? I'm still nervous about the economy - the negative effect from housing has quite a lag.]

And, as a kicker, it's always nice to wake up in the morning and read an article that generally confirms your own thesis, with quotes from one of the more prescient guys in the business.

Bloomberg: Oil Shares Signal a Rebound; Pickens Predicts Record 2007 Price.


``I keep thinking we're right at the bottom on oil,'' Pickens, who has correctly predicted rising energy prices for the past three years, said in a Nov. 22 interview. ``I don't see why the run is over if the global economy continues to grow.''