LNG Cheniere Energy – Short Squeeze Setup

by Olivier on January 12, 2011

Interesting times ahead. I am only stating the obvious here as I see plenty of excellent and bullish set-ups. Extremely healthy sector rotation. The market is simply plowing ahead climbing a huge mountain of disbelief. Too many people are still fighting this trend. I’ve seen this many times, been there done that.  If you want to succeed as a trader you have to leave your ego at the door.

The way some of the charts I watch are setting up, bears could be in for an extremely rough ride. APKT – Acme Packet e.g. is showing increasing signs for an impending parabolic move to the upside. I am not in the business of predicting. I try to anticipate where price will move based on my experience and my understanding of technical analysis. Then, I wait for prices to confirm my assumptions and react to price movements unfolding.

That being said, LNG – Cheniere Energy looks like one of the best short squeeze set-ups I’ve seen in quite a while. Here are a few reasons why I think odds for a short squeeze to be extremely high:

  • Natural Gas is the most hated commodity out there.
  • LNG carries lots of debt and is considered to be a very risky stock.
  • The future outlook is extremely promising.
  • The weekly chart is displaying incredible buying pressure.
  • Very constructive volume pattern.
  • The 10$ area is a strong magnet attracting prices. Round numbers like to be tested.

The trend with LNG is up and the volume pattern is confirming the new uptrend. In addition to the above mentioned factors that have the potential to drive up prices and add fuel to the fire I see the ‘air pocket situation’ I described in my LNG Cheniere Weekly Chart Analysis. If the stock keeps moving up this has the potential to literally launch the stock into the stratosphere. LNG has already demonstrated this dramatic price behaviour twice in the past. Once price rocketed higher, the second time the stock got crushed in no time. Odds are it will repeat past price behaviour.

We are not there yet. But considering the overall situation and the explosive chart setup there is no way I would want to be short this stock. I entered early on and controlled my risk using a stop loss. I am now completely emotionally detached. I continue to view this trade as an outstanding opportunity. I might increase my position above 7.30 US$ but otherwise I’ll just patiently watch and see how the bulls and bears battle it out. Let’s see what happens.

You only need to catch a few good trends each year to make all your money.

My public list with all my charts can be viewed here:

Buenas noches!

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