3SOF

Quote from: ScottishTrader on January 23, 2007, 08:03:05 PM
Well in case anyone is interested, OMNI had a nice day today, finally producing a nice white candle into the overhead gap.  There is still quite a bit of resistance to get through here, including 8.68-70 resistance, the bottom of that gap at 8.78, the 200MA at 8.72, the 9-9.10 base of November and december's trading, the 50SMA at 9.50, and finally horizontal resistance at 9.72.  But if it can beat tall that it'll be home free! 

Scotsman,

Nice job.

My first thought was, "If we're talking about all of that resistance, maybe we ought to be talking about shorting OMNI."

The first of the year, OMNI broke below your 9.72-9.73, breaking the neckline of a H&S Top, putting 7.65 IN PLAY.

Math:

Head - 11.81

Neckline: 9.73 (I always use the more conservative of the 9.72 - 9.73)

11.81 - 9.73 = 2.08 points.  9.73 - 2.08 = Target: 7.65

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there has been a lot of talk lately about "now's the time to get back into oil stocks while they're cheap.

Yes, I've been hearing that for several weeks, too, but when a stock breaks a pattern like OMNI did at 9.73 - 9.72  just a few weeks ago, we might want to remember that "cheap can get cheaper" before a bottom is in.

After that neckline broke, OMNI found horizontal support at 8.68, near the November 8.70 low, and just above its 200DMA.

At that point, it looked good for at least a re-test of the broken neckline at 9.73-9.72, and also looked like it might form another Right Shoulder, for a DOUBLE H&S Top (there are two necklines at this point, and two Left Shoulders).

Let's see what happened.  Next post.

Instead of a rally to re-test 9.73 - 9.72 resistance, OMNI gapped down below 8.70 - 8.68 support.

Quote from: Melf Elf on January 24, 2007, 07:31:52 AM

The first of the year, OMNI broke below your 9.72-9.73, breaking the neckline of a H&S Top, putting 7.65 IN PLAY.

7.65 got MADE, confirming the bearishness of the break of 9.73 - 9.72 support.

OMNI currently is at a re-test of broken 8.70 - 8.68 resistance, as you mentioned, and also just below its 200DMA.

"Sell, and/or sell short, breaks of support (8.70 - 8.68.  Short re-tests of broken support."

OMNI could run back above the broken neckline here, in which case it would be neutral, but I'd have to say that the Bears are favored here.

5.56 is IN PLAY, as long as OMNI trades below 8.68.

Thanks for the analysis Melf.  I didn't say it was going to be easy, but I still think the fundamentals may trump the larger technical picture here.  In any case, I have an entry of 8.10, so a bit of room to play with now.  I will see how it fares with 8.68-70 resistance this week before deciding whether to make an early exit.

Quote from: ScottishTrader on January 24, 2007, 09:18:14 AM
I will see how it fares with 8.68-70 resistance this week before deciding whether to make an early exit.

Scotsman,

The high at 9:34AM was at 8.68 resistance exactly, then it's come off some from there.     

Good luck! 

OMNI is right back up there again - just printed 8.69, but the wall is sitting at 8.70 now.  Still, I think it looks strong, it may just need a few pushes to get through.

Quote from: ScottishTrader on January 24, 2007, 02:36:36 PM
OMNI is right back up there again - just printed 8.69, but the wall is sitting at 8.70 now.  Still, I think it looks strong, it may just need a few pushes to get through.

Scotsman,

Well, now you've got a high of 8.73, and it's now at 8.71.  That would be nice if it could stick a close right there, at 8.71, just above 8.68-8.70 resistance. 

That at least would give the shorts some pause, and might scare a few off.  They want "former support to BE resistance."

Well we didn't quite get it, it closed bang on 8.68.  However, I'm not selling yet, I think OMNI may still have more in the tank.  It pierced that 8.68-8.70 resistance and tagged the 200MA, but there's no doubt that it might have some trouble here, but as you can see, OMNI is riding with the overall oil index.  So if the oil index continues to climb, OMNI should benefit.  However the OIX is also hitting some pretty serious resistance at 640 too at 640.  Tough one to call, maybe I shoulda taken a bit off the table.  Maybe tomorrow I'll see what the action brings...

Quote from: ScottishTrader on January 24, 2007, 04:53:19 PM
So if the oil index continues to climb, OMNI should benefit.  However the OIX is also hitting some pretty serious resistance at 640 too at 640.  Tough one to call, maybe I shoulda taken a bit off the table.  Maybe tomorrow I'll see what the action brings...

Scotsman,

I've got a stock for you to short, but no fair looking at the chart below until after you've read this.

The symbol is INMO, by the way, but no looking yet.

1. It broke out of a Bullish Inverse H&S and the target MADE.

2. It went up to next horizontal resistance, looked like it was putting in another neckline, but didn't bother to put in a Right Shoulder.  It exploded to the upside.

3. It has come back to that second neckline, filled the Breakaway gap, and closed smack on the breakout yesterday.

4. Beneath that, it's got at least FOUR levels of support.

The chart looks pretty good, I admit, but I think that we should ignore the bullish breakout and short it because INMO is in the widget business, and I don't think that widgets are going to do anything this year.

What do you think? 

hahaha  I get your point Melf.  But you ain't gonna get me to sell until the chart tells me to.  Putting the chart upside down, if I was long INMO right now I'd be real worried it was about to bust through support.

Maybe I'm foolish, but I want to see whether it has the strength today to make new highs above 8.74.

Quote from: ScottishTrader on January 25, 2007, 09:03:16 AM
hahaha  I get your point Melf.

Scotsman,

I thought you'd enjoy that.   

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But you ain't gonna get me to sell until the chart tells me to.

I would never want to get you to buy or sell.

I only want you to understand that the basic principles of trading.  At yesterday's close right at resistance, so being long is a low percentage play, and isn't favored.

"Could" OMNI rally?  Of course. 

But, there's a reason that we're taught about support and resistance.  Making a long play against   FOUR levels of immediate overhead resistance "could" be a winner, but it's likely to take some time, for one thing.

What is your Impatient Demon going to do if OMNI does a lot of "backing and filling," going nowhere?  In the long-term, you could end up "being right," but if you were feeling impatient about holding XING, how long are you going to be patient in this trade against the trend?

And, if you do end up "being right" about OMNI and about the price of oil, your "Ego Demon" is going to get stroked, which will reinforce making low percentage plays against trends, that aren't favored to win over time.

It's akin to so many other problems that we face in the market, like "Doubling Down On A Loser."   Getting rewarded for doing that is one of the worst things that can happen to someone, in my view, because it's just about a guaranteed road to The Poor House, if we regularly employ that as a market strategy.

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Putting the chart upside down, if I was long INMO right now I'd be real worried it was about to bust through support.

Of course you would, because that's "gut check" time when a stock re-tests a breakout.  But, over time, after a stock breaks out to the upside, "former resistance WILL BE support," percentage wise.

[quote
Maybe I'm foolish, but I want to see whether it has the strength today to make new highs above 8.74.
[/quote]

Not foolish at all.  We're learning, and we always will be.  As you know, my trades sure don't always work out, but it has helped me a lot to play with the trend, so I wanted to share that.

Best of luck on this one!

Well, I'm glad that I was rewarded for my persistance, as OMNI bust through 8.74 resistance on Friday and pushed up to hit the next $9 resistance level (high was 8.95).  I'm not saying its out of the woods yet, but Friday's move certainly suggests that OMNI has some bull strength here.  If it can break above $9 that would put it back into the trading rage it was in back in October and November, and I would anticipate some consolidation in the 9-9.75 area.  However, the difference between now and November is that we are on the verge of a very solid earnings announcement, and it is more clear that OMNI should see significant revenue growth in 2007 through their recent acquisitions.  My short term target continues to be 9.70.

Technically, the RSI, MACD and CCI are all looking good.  Also, during previous moves, the 9ema looks to have supported these moves, so it may be worth keeping an eye ou for a close below this.  Having a look at the 30min chart, the reversal bottom at the beginning of january formed an inverse H&S, with an 8.15 neckline and a target of 9.10  (bottom of he H&S was 7.20).  It also shows potential short term upside resistance at 9.17 and at 9.73.  Hopefully we will see that target (and possibly more?) achieved this week.

I still think OMNI has the power

Inverse H&S target of 9.10 MADE this morning.  OMNI managed to break into 9.00 range with relative ease this morning.  I'm waiting to see whether it can hold it today

Quote from: ScottishTrader on January 29, 2007, 10:16:09 AM
Inverse H&S target of 9.10 MADE this morning.  OMNI managed to break into 9.00 range with relative ease this morning.  I'm waiting to see whether it can hold it today

Scotsman,

Very nice!  Applause.

Interesting fractal behavior (repeating patterns) in OMNI, with the H&S Tops and Bottoms.  Here's another Inverse H&S Bottom in the Hourly Chart.

The Left Shoulder highs are 9.17 and 9.18.  This morning's high is 9.19, establishing the neckline on the right side of the pattern.

It would look real nice if OMNI now would go down and put in the Right Shoulder ABOVE 8.68 - 8.70.   That also would establish that "former resistance is now support."

If that should play it, this pattern would measure to about 10.18, right at the top of stacked resistance.

It's a lot to ask for, given that this pattern in the hourly chart is much, much weaker than is the DOUBLE H&S Top in the daily chart, but OMNI at least would have established a foundation from which to launch the attack if can form and complete this pattern.

If OMNI bids directly for 9.48 - 9.51 DOUBLE resistance (50DMA and 50% Fibonacci Retracement), that hind of "jam job" rally usually has difficulty succeeding because there will have been no base building at all. 

Good luck!

OMNI update:

After topping out at 9.18 resistance yesterday, OMNI has been pulling back a bit, and is currently sitting at 8.89 as of eod today.  Having a look at the 30min chart, it looks like the price is sitting right at the base of the ascending channel that it has been traversing since it bottomed at 7.20 earlier this month.  I would like to see OMNI rally from here but if it breaks down from this channel, I would expect key 8.68 support to hold.

Melf has made a fair case for being careful about going long into a situation like this with a lot of overhead resistance, and I think this is a reasonable point.  At the moment I'm considering selling a break of this channel, and either looking to buy back around 8.70 if it bases there, or waiting for a break of 9.18 resistance, possibly with a buy sop at 9.20 to protect profits and catch the breakout.  But to be honest, its a "save a couple percent or lose a couple percent" srategy really, so it may be better to just hold on if it pulls back some, and set my stop below 8.68.  I consider this a stock with a huge amount of potential, and I'd like it to be a long term holding

OMNI haven't announced when their earnings will be released yet, but I expect them to be strong, and this should give a better outlook as to how the company will procede going forward.  They are still continuing with their aggressive acquisition strategy, having just announced the purchase of seismic drilling assets from Cypress Consulting services for $10.1M, which includes an order backlog of $20M, further expanding their workforce and ability to generate revenues.  There is no question that OMNI is growing rapidly - they have gone from $11M in revs in Dec 05 to 26.6M in Revs in the last Q.  Analysts estimates are for revs of around $26M for this Q, but with more recent acquisitions gaining traction, I think there is room for significant upside surprise here.  So far they have earned .62 this year, assuming no growth in EPS from last Q (which was .27), we would get a total EPS of .89 for 06.  At $9 a share this represents a P/E of 10.1, vs. an industry average of 16.6.  So on an earnings metric alone, OMNI is 60% undervalued.  Its current P/S ratio is low at 1.64 vs an industry average of around 2, and it is growing at a phenomenal rate.  Last year they earned total revenues of $43M.  So far this year (in the first 3 quarters) they have earned over $70M.  I would expect to see $100M+ revs for 06, which would represent 130% annual revenue growth over last year.  And clearly they are putting to pieces in place (through acquisitions) to continue this trend.

OK I'll stop now, clearly I'm bullish on OMNI, and maybe I will work this one as a "David" style trade.

Oh and one more thing, when we talk about trend trading, its always worth having a look at the long term charts.  Below is the 1 yr daily and the 2 yr weekly semi-log charts.  The long term trend for OMNI is clearly up.  In fact, if the 2 year chart was a daily chart, I'd be all over that 7.20 bounce off MAJOR long term support.  Both charts suggest that the last 6 months or so have been a consolidation of the previous 18 months enormous gains ( I remember trading OMNI badly last October 05 when it was trading between $2 and $4).  The 1 year chart looks like OMNI has spent the last 6 months buliding a large symmetrical triangle.

Putting it in this perspective, the real test will be around $11.  If it breaks out above this level, and then above $12, it should start a major run well into the mid to high teens.  If they earn .96 this year (pretty likely), an industry average P/E of 16.6 would mean a fair value of $15.95 per share.  A solid earnings announcement could get us well on the way to this level.

Oh and one more thing, watch the OIH (Oils services indeax) and the $OIX (Oil Index).  The OIX is absolutley chomping to break 640 - after pulling back at the first attempt, it put in a strong candle today, and looks ready to go tomorrow.  The OIH also hast been testing (and closed above) key resistance at 135, though it really needs to get above 137.  If these both move up this week, it will bring OMNI up with it.

And finally, my apologies for so many charts, I think I got a bit carried away....