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Holly Frontier A Possible Investment?

11/20/12 10:32:27 AM
by Koos van der Merwe

In today's uncertain and volatile market, looking for future investments is always a plus. Holly Frontier may be worth a look.

Security:   HFC
Position:   Sell

Holly Frontier (HFC) is an independent energy company engaged in the refining of crude oil and the marketing of refined petroleum products. What brought the company to my attention was the buy signal given in Figure 1.

FIGURE 1: HFC, WEEKLY. This chart shows a vote line buy signal.
Graphic provided by: OmniTrader.
Figure 1 is a weekly chart and shows the buy signal in the vote line, a result of buy signals given by the red-green strategy long, the red-green strategy long 6, and the Verve trailing stop. The internal band strategy gave a buy signal on January 23. Do note that the red-green strategy long stop has been in continuous buy mode since February 16, 2010, when the price was $13.70. Note that the relative strength index (RSI) four-period indicator is bullish, but the 14-period RSI is bearish. To understand the stock's movement, I looked at the daily chart.

FIGURE 2: HFC, DAILY. This chart shows vote line buy signals.
Graphic provided by: OmniTrader.
Figure 2 shows a buy signal given by the vote line on October 26, as the price crossed above the Verve trailing stop. Both the RSI four-period and the RSI 14-period are in sync, at overbought levels. This suggests that we should not buy the stock at present prices but should watch for a sell signal that could be triggered. The recent rise in the price was on falling volume, a sign of weakness.

FIGURE 3: HFC, WEEKLY. This chart shows an Elliott wave count.
Graphic provided by: AdvancedGET.
I would not be a buyer of the stock at present levels but would watch for the Elliott wave ABC correction (Figure 3) and start accumulating as the C-wave finalizes and the 14-period RSI is in the buy zone.

Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

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