At The Close by Donald W. Pendergast Jr
Shares of Anadarko Petroleum are leading the S&P 500 lower, but this beleaguered stock might find an area of support near $31, possibly setting up some put sale opportunities.
IT didn’t take very long for the BP oil catastrophe to spill over, affecting not only the share prices of BP but for virtually all of those companies involved in oil exploration — including shares of Anadarko Petroleum Corp. (Apc), one of the key energy-related components in the Standard & Poor’s 500. One look at the weekly chart (Figure 1) immediately lets you know that this is a stock under great bearish pressure.
Cut in half in only nine weeks, shares of Apc at this point look more like the proverbial “falling knife” than that of a stock preparing to make a graceful landing. Charts like these sometimes remind me of the wiseacre who reputedly said, in the wake of the major stock market crash of 1973–74, when the S&P 500 lost 48% of its value in about 19 months: “I’m putting my money into the S&P these days.”
His surprised friends thought he’d lost his mind until he clarified his reasoning: “Sealy and Posturepedic, that is. I’m stuffing the money into my mattress. No more stock market for me.”
Whether or not if this is a true story, it does a good job of depicting how most burned investors feel after suffering major (and usually unexpected) losses in the market. Unfortunately for “Mr. Sealy & Posturepedic,” he probably also missed out on the big relief rally that commenced in August 1974, one that lasted well into early 1975. He wouldn’t have made all of his losses back in one shot, but it could have helped ease his pain (as well as making his bed a bit more comfortable to sleep on).
There are plenty of people with similar outlooks on the market right about now, but if they’d just step back and get a bigger picture, they might observe that there are some major support areas residing below the current prices of the major indexes and that there may be at least a temporary relief rally due sometime in the next few weeks.