L.A.'s article appeared on the video section of TheStreet.com on on 03/18/2010

One sector that has continually underperformed is the refiners. Look up and down the list and all of them have had squeezed margins for a very long time now. Although it isn’t clear if that logjam has broken, it is clear that Western Refining (WNR) has had larger buyers stepping in for a while now. That seems to suggest that they see value. Let’s see if we can too.

On the long term timeframe, it is very hard to see the value unless you believe that a $61 decline necessarily creates value. Now maybe it does, but that sure is hard to buy. What’s to keep a $63 decline from creating value which would be another 40% decline from here?

WNR Monthly

Charts by ProphetNet.net

Our examination of the swing points are not of much help either since this chart remains confirmed bearish. In fact, on this time frame, there is very little to give a bull any comfort.

Now we can see a support zone where the most recent break below the swing low is in the process of being recaptured (the last two bars). That’s a small positive. If this chart is finally starting to bottom, the overhead resistance on this timeframe will be felt once price makes it back to the bottom of that high volume bar from June of ’09.

So, with the monthly chart reasonably pathetic, what about the weekly? Here we can see that a persistent downtrend has been in place for the last nine months. Other than a few small forays outside the channel occasionally, for the most part, prices have been contained quite well by the channel. The trend in confirmed bearish here as well and again, there seems to be no reason for hope. The small ray here is the high volume spikes to the upside during the downtrend.

WNR Weekly

Charts by ProphetNet.net

So, with such a painful set of charts, why in the world would we think to buy WNR? It’s on the daily that you can find the trade and, although the journey north will be painful when it occurs, it has to start somewhere unless this company is in the process of disappearing or set to languish at the lows forever.

WNR Daily

Charts by ProphetNet.net

On the daily chart we see large spikes higher with huge volume thrusts. The last spike up produced a confirmed change in trend and the recent trade back to $4.70 hasn’t produced a push lower as of yet. With the idea that the biggest money made is at the edges, we seek a position in WNR. With a confirmed change in trend, this is a good reward-to-risk setup target zones at the January 1st highs and then again at the $5.80 mark. To see exactly how I’m trading this from the long side, take a look at the more detailed video presentation here. [link to video]

So, until next time, keep trading the charts!