Looks like CNEH could test $3.00

I last posted about CNEH here. I was expecting price to rally strongly after earnings were released, but the opposite happened. I mentioned that if price broke through the major support in the $3.50-70 zone, I would consider selling out because a major fundamental change must have happened to allow that sort of price action. The earnings report was strong, but due to a change in the pricing of oil, CNEH earned 1m less revenue than expected (this will be made up in Q3, but the market didn't like it). However, CNEH still has a TTM EPS of $.56 and they are revving up their drilling program according to schedule, so future earnings should still be growing at a 100%+ rate. Reassessing the stock, I feel that a decline to the $3.00 level would be reasonable, if not expected, so I am holding my position.

Notice on the daily chart above that CNEH's price action confirmed a double-three complex correction. Instead of bottoming at $4.03 after completing three waves down, CNEH made new lows after the earnings report. Thus, Wave-A is the first "three-wave" pattern. Now Wave-C would be the second "three-waves" in the double-three. A drop below $3.30 would be necessary to complete Wave-C.

I am guessing that $3.00 will hold as there is plenty of support in this zone:

  • $3.15: 61.8% retracement of $1.61-->$5.68
  • $3.07: Wave-C = Wave-A, a common relationship for corrective waves
  • $3.00: descending channel support for next 1-2 days
  • $2.93: 50% retracement of $.17-->$5.68

At $3.00, CNEH's P/E would be 5.36. Seems awfully cheap for a stock still growing at 100%+!

Wave-A took 16 days to unfold. Wave-C has taken 12 so far. Therefore, I would expect CNEH to drop for another few days before bottoming.

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