NEP Technical Picture

NEP just broke to new highs today. Everything about this looks great! We know the company is excellent, as you can see from my brother's posts (Is NEP Buying More Drilling Rigs, NEP 2010 Earnings Projections, NEP's Newest Addition--Tiancheng Drilling and Oil Services, and NEP Update after Q3 Results). However, in my experience when everything is perfect, and optimism abounds, it's time to take at least short term profits. I expect a drop to $5 from the $7.00-7.50 level.

On the daily chart above, you can see that we just broke out of a massive triangle consolidation. However, these types of thrusts are often quickly retraced, even if just part of a correction. I could see a retracement to the $5 range, which should correct most of Wave-(i) of Wave-iii.

On this chart, you can also see that the up move has been quite parabolic, and the breakout has come after the overall stock market has made a big up-move. Clearly NEP isn't playing a leadership role. If this stock was breaking out to NEW highs near the beginning of the rally, I would trust this price action more. However, when it's one of the last stocks, I think this stock is getting ready to wipe out all the optimism :).

Good luck!


symboltrader said...

Once again you saw through the B.S. and were right. Now we see if it follows through to the downside tomorrow.

Narayana said...

Yeah we'll see what happens... I got lucky here :P