Wednesday, June 2, 2010

Tea Leaves, Voodoo & Other Dark Forces (4)

Last week I posted a daily chart of Suncor Energy with at least 11 squiggly lines to ponder in order to make a trading or investment decision. Keep in mind I never liked Suncor because it has been a persistent under performer through September 2009 and I am not a fan of the tar sands producers because their business models are cluttered with cost problems and environmental issues. I chose to put aside from my personal negative bias and ignore all of the studies and bought the stock for a trade at the close at $30.69 at May 26, 2010.

Rather than using the RSI, the Bollinger Bands, the 3 moving averages, the candlesticks and the MACD I simply focused on a relevant relationship. Things like for every bull market there is a bear somewhere else, or for every capital event there is an opposite capital event somewhere else. In the case of Suncor the stock should be crude price sensitive and so I needed to see if Suncor was in the process of setting up a lead – lag relationship vs. the price of crude. I believe a short term buy signal was flashed on May 21 when the price of crude (or the USO) broke below the February 2010 lows and the price of Suncor did not, setting up a condition called positive divergence between to related asset classes. So what will it be, squiggly lines or relevant relationships?


Rich said...

Ahhh I see sensi. Even though there are the graphs to consider, broaden the scope of consideration to other factors such as industry groups, sector rotation, large-relative players and the like. Macro along with the Micro. In the thick of things going on, its sometimes difficult to separate the trees from the forest.

Steve said...

Very interesting Bill. Sometimes it's easy to forget (or fail to spot) the relevant relationships.

What would you consider a good exit point for Suncor?

Anonymous said...

Appreciate and study with interest your latest series. "Relevant Relationships" strikes me first hand as an "Elegant" form of analysis.

Must admit extreme cautiousness with "elegant solutions" ( they at best assume a high level of expertise), so I look forward to testing it at my current level of technical trading experience. Ron, Mississauga