Jim (cont'd):     

Not only does Marathon’s chart paint a beautiful picture… perhaps in the order of Mona Lisa… if not Marilyn Charet… but the fundamentals also back up what Fitzpatrick says the chart is saying… we call this one twice blessed… good chart and good fundamentals… first take a look at this chart… this shows the relationship between Marathon in yellow and the price of light sweet crude in white…alright… there is a strong positive relationship, long term, between the oil and gas refiners and the price of crude… Marathon’s stock prices generally moved in tandem with the price of crude… but since November we have been seeing what is called a positive divergence… okay positive divergence… this one is going up… this one is going down… between Marathon, along with the refiners, and oil prices… Marathon and the refiners have been making higher highs… let’s take a look… see that’s a higher high…. higher high… I have to explain all of this stuff… meaning there are more eager buyers for these stocks… even as the price of oil has continued to decline.

Now, beginning November 5th, after a series of higher lows in Marathon… we are starting to see what is
a double bottom in oil…  okay?…  Or, in plain English, rather than in Wall Street jibberish, since December… the December low… oil is holding up… we know that selling pressure isn’t increasing… that is the first of the two steps required for what is known what is a trend reversal… meaning for oil to stop going lower and start going higher… the second step is for buyers to start stepping up and pushing oil higher… which on the chart would show up as higher peaks and shallower pullbacks… again, since there is a strong coalition between Marathon’s price and the price of crude… a turning crude which this charts suggests is close… would cause this chart to go higher.

Okay, now let’s look at Marathon’s chart by itself… okay… Marathon’s high volume mid November low… what is what is known as the selling climax… which effectively was supposed to have washed out all the weak cants from the stock… meaning all the people who can’t really take the pain… pretty much everyone who wanted to sell who couldn’t take the pain… according to Fitzpatrick now sold… that is what he says the chart says… take a look at the 50 day moving average… okay… you can see… and that is this red line… and again, these are all technical terms…you can see Marathon’s late October, mid November lows were at an extreme distance between this… okay… and extreme distance between the 50 day moving average… nothing magical about moving averages… they are just a reference for determining how much force has been exerted on a stock by buyers vs. sellers… so when prices move too far… too much of an extreme below key moving average… like they did in October… and again in November… the selling power acquired to create that disparity is probably exhausted.

Enough about sellers, what about buyers… Marathon’s recent pullback to it’s 50 day moving average… okay, there we go…. that sets up the key test of the stocks recent uptrend… we want to see two things to know that the buyers are really there… first a rally above the resistance line… right there… which would indicate that buyers are stepping up… second we want to see the price of crude continue to rally… reinforcing the relationship that we saw between the first chart, between the price of crude and refiners in the first chart… I know that moving averages, selling climaxes, subsequent exhaustion, as well as trend reversals, and shallow pullbacks… might sound like something that occurs between consenting adults… not stocks… but believe me, it is technical speak… and you need to know what these charts are saying… because everyone from hedge fund managers… I know, oxymoronic… to the biggest and biggest mutual funds look at these pictagraphs everyday… even though they don’t admit it… they keep them in a drawer… the will never admit this to you… but I know they look at it.

You know what the charts say, now how about the fundamentals… okay… let’s talk about the fundamentals… is there a case for buying for Marathon the oil company… based on the underlying business… not the chart… as a fundamentalist myself, think Warren Buffett, not Lakola Kumania… I think so… Marathon is a refiner and a producer… refiners are seeing higher margins… in an interim update, Marathon said, it saw refining margin of .12 cents a gallon… three time the margin of just last year… and that is because of cheaper price of oil… now, how does that translate… how do you know… because you paid more at the pump than you should have this weekend, given where the price of crude is… and much of the difference goes, indeed, to Marathon and the other refiners.

The other reason that we have liked Marathon in the past, is that it was talking about splitting itself in two… a refiner and an explorer and producer… we like this idea… right now Marathon gets a sub-par evaluation… it is trading at only 7.8% times earnings… Exxon trades 13.7%… Chevron at 11.4%… they are not just that better… I believe both parts of the company would get a higher evaluation separately than the two together… the whole is worth less than the sum of Marathon’s parts… now we did think it would happen in January… but Marathon delayed the break up because of the credit crunch… we all know about that… and weaker oil prices… now I believe that the breakup will still happen… but Marathon’s indecision washed out a lot of the weaker hands… now remember, that is what Dan Fitzpatrick said… this was about washing out the weaker hands… these are people who gave up… they didn’t see anything positive, not a split up… it is also clear that lowered expectations… a lot of the risk has been taken out because of that… which also jives with what we saw in this chart… the expectations has been taken out, so now it is able to go up… Marathon has yet to sell between $1 to $3B worth of assets… it has a number of upstream, mini production projects, it should start wrapping up…. there is a lot of upside here compared to the other oils… and given that it is the worst performer, and much smaller than the big integrateds… I know this sounds absurd in this horrible market… but one day Marathon could be a take over target…. remember, because the other oil stocks are so much stronger… any one of the winners could pick off this loser the moment that the M&A market thaws… and remember, I never recommend a stock on take over basis on this show… but, and I certainly wouldn’t do it unless the fundamentals are good.

Here is the bottom line…

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The Bottom Line!:     Marathon’s got a bullish chart, I have learned that from technicians… it has got bullish fundamentals… I am telling you that… I think it is more than just save… I think it is a buy, buy, buy.

MRO - our first off the chart suggestion…. the technicians like it… I am joining the technicians on this one… and I think that MRO is a buy.

[verbatim recap]

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Jim went on after this segment to take questions from callers, and responded with his comments...

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Q:     So you have been talking lately about charts vs. fundamentals, and I have a question. I know that you like buying stock on the way down, but in terms of capital preservation, or being conservative, would it be a good idea to wait until the chart starts going up, and possibly crossing its 50 day moving average before pulling the trigger?

Jim:      I think a lot of people who are technicians feel that way… now just so you know, I am not anti chart… I happen to look at 200 day moving averages… why do I look at 200 day rather than 50... because I think… and the one thing that I should have qualified this off the chart segment with is, I am not a short term orient… despite many, many articles about me that say I am completely short term oriented… I am not short term oriented for ActionAlertsPlus.com, my charitable trust… and I try not to be short term oriented on this show… except for on speculative Tuesday’s… I think the 50 days is important for people who get conviction from charts… I like the 200 day because I do not want to be caught trying to catch a 15% or 20% move over 5 days… I want to catch a larger move over 5 years… so, if you get comfort with 50 day, you should use it.

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Q:     ConocoPhillips (COP*), we got in at $50, following you know, it was one of your stocks that you liked along the way. It doesn’t seem that Conoco Phillips follows the guidelines of the other oil company stocks, is there a reason for that?

Jim:      First of all, Jim Molvo, who runs Conoco, is just incredibly honest, and I just like him very much… second, remember what I said would happen in Conoco… I said that they would give a terrible update on Tuesday and then you would buy it below $50... well they gave the terrible update that we were looking for… and I went… and I pulled the trigger for my charitable trust, which has beaten the market nicely this year… don’t know if that is the case today…. but I waited, and waited, and waited… and boom, we got what they said… I like Conoco because it has more natural gas than any of the other integrateds… and that… that, Edward, is what I think is different… people hate natural gas even more than they hate oil… and Conoco paid a lot for it’s Burlington Resources, not that long ago… I mean, from the point of view of the long term Exxon/Chevron thing… and that is why I think it acts so badly.

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Q:     You have been talking about the technical lately. And you said that you kind of favor the fundamentals when picking a company. And my point is, you can have a company that is the most fundamentally sound company in the world, but if no one wants to own that stock, that is not good. Or you can have a company like in the dot.com days, that never showed a profit, and never would, but everyone wanted to own them. But especially in this wild environment, wouldn’t it be more prudent to favor the technical analysis over the fundamentals?

Jim:      You sound like my friends, Bert Dohleman, from the Wellington Letter, and my friend Ken Shreve, from Investor’s Business Daily, who I have been integral in making me integrate the charts… remember when I said that I take charts from everybody for this new segment… I am never going to tell the chartists what I am going to say about the stock… I just want their stock… no one is to know what I am about to say about a stock… however, I think that this is a very technical emotional market… so, therefore, I am integrated the technicals even as I frown on using them to make longer term decisions… what you are seeing is the melding of what others have to say on this show.. which I hardly ever do… with my own fundamentals and if we get something that is twice blessed… I know I feel certainly much better…. would you have got you out of the dot.coms…yes, I know that… because then I was at my hedge fund… and I was very vocal about looking at the charts.

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[verbatim recap]

[end of segment]


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