The Eric Nuttall Delphi flip-flop

Eric Nuttall is a portfolio manager at Sprott Assett Management and a regular on BNN's Market Call. This guy knows very detail about every Canadian energy company. Unfortunately if you followed is picks over the past year you were frustrated. That is because there is no relationship between a stock’s fundamentals and a stock’s price performance. Technical analysts know the price always leads the known fundamentals. I clipped the following Nuttall’s Delphi Energy Corp comments from stockchase.com

THE BUY: Delphi Energy Corp. (DEE) $1.95 “2011-10-13 BUY Eric Nuttall Gapped down on the volume and on very little volume. Drilling the first Montne well with strong liquids, which increases the economic value of the gas stream. Has recently been buying.”

The price of natural gas (nearest contract) on Oct 13, 2011 was 3.70 mcf

THE HOLD: Delphi Energy Corp. (DEE) $2.00          “2011-11-30 TOP PICK Eric Nuttall Have an extremely exciting drilling catalyst coming up. Their 1st Montne well will have results before Christmas and is an incredibly important play because stock has languished under the perception that is that slow 10% growth type of company.”

The price of natural gas (nearest contract) on Nov 30, 2011 was 3.52 mcf

THE NOT TOO SURE: Delphi Energy Corp. (DEE) $1.26    “2012-09-19 Comment Eric Nuttall     If you are a Buy and Hold investor, he would say this is good for 2-3 years. If you believe we are going to have a strong recovery in natural gas about $4, it’s a great investment. Their wells are very expensive. They are going to cash flow around $40-$45 million in 2013, using $3.50 gas.”

The price of natural gas (nearest contract) on Sept 19, 2012 was 2.98 mcf

THE BAIL OUT: Delphi Energy Corp. (DEE) $1.03    “2013-01-09 DON'T BUY Eric Nuttall Largely a liquids rich play and they get pretty good liquids cuts so they get a lot of condensate which sells at a slight premium to Edmonton light. Stock is down 10% today and thinks we are beginning to see a “trade out of the have-nots” which he would put this company in. Because of its market, he doesn’t think this will be the 1st company that people will buy. There are better buys out there.”

The price of natural gas (nearest contract) on January 09, 2013 was 3.33 mcf – and a As of this writing the price is 3.42 per mcf.

So what is the lesson here? We have an expert who is sincere and has detailed knowledge of a company and is passionate about his convictions - so much so to be drawn into his own compelling story. What makes him toxic is the use a national TV platform to draw in investors much like a moth to a flame. In the end they all get burned. Never forget – a stock price is based on what will be and not what we know today. The weekly chart of DEE tells all.

All Eyes on Barrick Gold

We have looked at gold in terms of the long monthly cycle trough and the weekly or intermediate cycle trough occurring at the same time and observing the last time this occurred was in mid 2009. Then we addressed the “Death Cross” myth which in technical lingo is very scary event. In reality the golden and death cross trades involving stocks and indices bat 50/50 on trades because they occur half way into the move – up or down. The death cross on all of the major gold stock indices occurred in early January and at this point the 50-day MA is very far below the 200-day MA – and this is the level we usually get a turning point – but we do need another event to support this assumption.

Barrick Gold is the key – now at important support in U.S. and CDN $ charts – our TSX listed Barrick weekly chart displays the key support that must hold here. Note the positive divergence setup on the money flow numbers.

The Golden Death Cross

On my last post I looked at gold in terms of the long monthly cycle trough and the weekly or intermediate cycle trough occurring at the same time and observing – the last time this occurred was in mid 2009.

I see this AM a talking head at BNN was discussing gold and a pending “Death Cross” – which in technical lingo is very scary event. A death cross occurs when a security's short term moving average (a 50-day) turns down and below a longer term moving average (a 200 day). Conversely a golden cross occurs when a security's short term moving average (a 50-day) turns up and above a longer term moving average (a 200 day).

I did several studies on golden and death cross trades involving stocks and indices. The signals bat 50/50. I other words by the time the cross occurs – we are half way into the move – up or down. This technical myth is obvious on the chart of the GLD displaying a pending very late sell signal.

Gold Cycles

This is a series of clips on cycles from the Canadian Securities Institute Level II technical analysis course that unfortunately is no longer offered. The three qualities of Cycles are Magnitude, Period and Phase. Magnitude is the measure from cycle peak to trough, Period is the distance between the cycle’s troughs and Phase is a measure of time location of a cycle trough.

The Five Cycle Principles are Summation, Commonality, Variation, Nominality and Proportionality. Summation is the simple addition of all active cycles. For example, a 20 day cycle is made up of two 10 day cycles The 10 day cycle is made up of two 5 day cycles, etc. All price patterns are formed by the interaction of two or more different cycles. Commonality is when the peaks and troughs of cyclic fluctuations are time synchronized.

On other words if we can spot a security or commodity that is printing short and long term cycles with the peaks or troughs closely aligned then we could have and important juncture setting up. In the case of gold our chart illustrates a weekly or intermediate cycle trough occurring at the same time as a pending long term monthly trough – the last time this occurred was in mid 2009. Enjoy