Question: Are we going to experience a Xmas rally this year?
As noted in an earlier posting ECA's Broad has indeed cut the dividend Roughly by 66% (from 20 cents to 07 cents). How is that for radical?
Looking at the chart of ECA (below) ending Friday, November 22, 2013. I can see that ECA share price had rallied from the October low ($17.62). As my original analysts showed that $17.50 was the lower end of the trading range and the upper end being $20.50. On November 21 ECA surpassed the $20.50 by 3 cents. The very next day the share price had become negative on the day (dipping 1.7%) while both the US and CND markets were positive.
Is this a sign that the smart money had bailed on ECA, at least for now? Have a look at the volume chart. I can also see that there has been a very large volume in ECA's shares at the beginning of November roughly 16 million shares changing hands in one day when the average daily volume is closer to 1.8 million shares. For the month of November ECA has maintained a higher volume, closer to 4 million shares exchanging daily.
This brings me back to the question about the xmas rally. The fed is still pumping $85 billion into the system where is the money going? Are the brokers and Mutual fund managers looking to boost they're xmas bonuses this year? Are the markets going to fall back towards a more reasonable valuation? A rising demand for Natural gas ?
For me I think that we are in a xmas rally and some factors that are taking place is that can affect ECA's share price. 1) Demand for Nat Gas is rising. At some point the price for Nat Gas will follow that demand. 2) I'm sure that the QE (whatever number) is driving up share prices across the board 3) I also believe that the brokers and mutual fund managers are looking to top up their xmas bonuses. With these question I am leaning very much to the point that the xmas rally will end sometime in January and the market (in general) will begin to fall towards a more reasonable valuation. How badly? , that can be difficult to figure out at this point.
With my negative leanings, I'm feeling pretty confident that my two options $17 calls and $17 puts will protect my holding even thou I wish to clear ECA out of my TFSA as I'm not willing to hold a energy stock that is paying me only 28 cents per year in dividends.
I'll write an update soon about where I think ECA and the market is heading. Till then happy trading.
