Anadarko Petroleum (APC)
(5/3/07)

In studying the Elliott Wave patterns in both the AMEX Oil (XOI) and Natural Gas (XNG) indices, it's doubtful that stocks across the board in these sectors have completed their runs.  APC gives some exposure to both.  While I'm less bullish the commodities at this point, both nat gas and oil are still in what should be incomplete recovery rallies, per the course their wave patterns have taken.  As one of the larger XNG components, APC mimics to large extent the XNG's wave patterns.  Also, despite some earnings news about one-time charges that could have taken negatively, the stock is still showing evidence of accumulation, which bodes well for market sentiment.

One thing that makes a challenge of APC's 56.96 all-time high probable is the clearly corrective decline pattern from April 2006, suggesting it to be the fourth wave of the historical pattern from 1998.  The daily chart also a shows a distinct 5-wave advance off the 38.40 low of this past March, which is countable as Wave 1 of (5).  For the moment, the issue whether Wave 2 completed with respect to our entry point.  The pullback from the April 25 high of 48.16 was a near 38.2% Fibonacci retracement, but the emerging pattern isn't definite enough to indicate a retest can't develop.  A conservative entry therefore would await a break through the 48.16 high.  There is resistance below 50, and of course the Wave 1 rally stalled just below that.  However, we think any resistance should prove temporary, assuming a Wave 3 of (5) advance is unfolding.  45 could be used as an initial stoploss.  Intervening resistance areas are noted in the daily chart, with the most ideal Wave (5) high occurring at 64.  However, the stock could still top out at the 57 or 62 levels to complete the intermediate degree advance from 1998.

For an option play, which I think would be a good way to do this, we're looking way out to the January 2008 $50 Call (symbol YPC AJ).  Not that I think it'll take that long, but to give the breakout some time with a well-priced further out month.  The Call is currently selling for $3.10 with the Delta at 0.46.  

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