 Okay, folks, welcome to a quick round of technical analysis of Sonovous Energy, Inc. ticker symbol CVE. Sonovous is in the energy sector and recently announced as of yesterday that there would be an acquisition of Husky Energy, which is traded on the Toronto Stock Exchange ticker symbol HSE, whereas Sonovous is traded on the New York Stock Exchange, again ticker symbol CVE. Now what we're going to talk about on this video is the news that was announced. We'll spend a few minutes talking about the balance sheet of each company. I'll give you my thoughts on a potential trade here. And then we're going to do a deep dive into the technical analysis of the energy sector. And then we'll leave off with the charts of CVE. We'll do some technical analysis there. And we'll leave it off with what I think the trade is on this announcement, where I believe the share price of CVE is going in the near to short term. And what will the catalyst be to propel the shares up higher? So let's get to it. In the news, off of Reuters, Canada's Sonovous Energy to buy Husky Energy for $18 billion. Now this is a trend that's going on here in the energy sector. And it's during this phase of the consolidation phase of a sector where you really want to begin to take a look at the companies that are acquiring for the long term. Now, earlier this month, Contra Resources Inc. agreed to be taken over by Conoco Phillips for $9.7 billion. And that followed Chevron Corp's $4.2 billion purchase of noble energy. So this is a trend that we're beginning to see. And it's a very positive trend for the energy sector, which has been under a tremendous amount of pressure these past several years. This acquisition would give Sonovous some scale by making it the number three Canadian energy company. And you may be reading this here saying, wait a minute, you just said $18 billion acquisition. Folks, keep in mind that Husky has a tremendous amount of debt. We'll go to that in a moment. But net net, Husky shareholders will receive 0.7845 shares of Sonovous stock, as well as some warrants. And it looks as though this transaction already has the green light by the boards of both companies. So this is for real. It's happening. Expect a lot of volatility tomorrow morning being Monday in the shares of both Sonovous and Husky Inc. Now let's get to some of the numbers of each company. Now on Friday, Husky Energy Inc. closed out the day at $3.17 in Canadian dollars. Now moving on to the balance sheet, Husky has $633 million in cash, which sounds like a lot. But in reality, it's not relative to its debt. They have a tremendous amount of debt over $7 billion in debt, which is going to to be acquired by Sonovous. Now, I suspect on Monday morning, you're going to see the shares of Husky Energy rip through the ceiling. Anybody saying, you know, that's no brainer, Bob. They're being bought out. Well, what's going to make it even worse is the fact that you have a lot of shares being held short. If you do the math here, you have about, I'm just going to round this off to say four days of short covering that is going to happen on Monday, Tuesday. So the poor son of a gun that is short of Husky Energy, I feel for you. And I also feel for the hangover you're going to have tomorrow morning after you get done with your second bottle of scotch today. So very bad news for shorts in Husky Energy Inc. Now, taking a look at Sonovous, you know, this is their balance sheet. This is a company that has been through really, really rough times since 2015. They've seen a huge cash burn rate. They were carrying cash of $4.11 billion in 2015. As of the end of 2019, that dwindled down to $186 million. Now, the five-year trend on sales and revenue has increased dramatically since 2015 from 13 spot 06 billion up to a 2018 high of $20.84 billion in revenues. You saw a tick down in 2019 by about 3.18%. But for a couple of years there, you saw some really dramatic growth in sales. In terms of liabilities, I mean, really for an energy company, not bad. They've done a really nice job of dropping down their debt from a 2018 high of $682 million down to $196 million in 2019. And when you take a look at their return on equity, that's pretty good. They're in the double digits on return on equity, nearly 12%. So apparently we have a fairly good management team at Sonovous. And given how they're managing this company, they appear to know what they're doing. So in terms of confidence in their ability, it's pretty high. Now, taking a look at the share price of Sonovous, you can see that we are in a long-term bear market. And what do I think the outcome is going to be tomorrow of the impact of the news on the shares of CVE, considering the fact that they are accumulating a lot more debt than what they were carrying as of the close on Friday. My prediction is that you're probably going to see a gap down. Now, if we don't see a gap down, well, then these shares are priced for a worst case scenario. Now, we're going to do some technical analysis here based upon my thought process that in all probability, you're going to see weakness in the shares of Sonovous on Monday, Tuesday, the remainder of the week. But let's talk about what the opportunities are here. We're seeing consolidation in the energy sector as a whole. Let's go to that chart of energy and we'll come back to Sonovous in a moment. Here is the chart of the XLE monthly timeframe. And you can see that energy peaked out in June of 2014. And ever since that point in time, we have been in a nasty, nasty bear market. But I'm of the opinion because we have been buying energy stocks. I'm of the opinion that the bear market in all probability saw a bottom back in February of 2020 when you saw the baby get thrown out with the bath water on energy stocks. We since rallied seeing a peak on the XLE in June of 2020. Now, we're pulling back to what I believe to be a higher low on the XLE, which is representative of the energy sector. Here's our lower band of support. You can see for the month of October, we are up at current with a few trading days left to go. And here is our upper band of resistance. So the deal was announced at a point where we may be seeing an inflection point in the performance of the energy sector moving from a clear and defined downtrend to a respectable sideways consolidation and perhaps with a bias now to the upside. And with the U.S. dollar weakening, that should only help the price of oil longer term. And if the price of oil continues to move up higher, well, then energy stocks should follow suit. Now taking a look at a chart of CVE, same timeframe as the XLE monthly time frame, you could see that the two look very much alike. We saw a bottom on CVE back in March. We saw a counter trend rally. And now we're pulling back to put in potentially a higher low. Let's draw some trend lines. So here's our triangle formation on CVE. The question is now, after the news, do the shares of CVE being the choir and the choir usually going down? Initially, when an acquisition is announced, do they hold this lower band of support or do they break? That question we have no idea about, right? The market's going to tell us whether or not the share price is priced for the worst case scenario. And we'll know that right off the bat. If we gap up tomorrow or we move lower on the day only to close up higher, well, then that's a stock that needs to be bought. That's the market telling you, yeah, this is a nothing burger. Don't worry about it. We want this. This is good. But what if there's a delayed reaction to what we're seeing as longer term bullish for the shares because of what we're seeing in the overall sector, meaning technical bottoming action and acquisitions as recently as this month? Well, what I do here is I would set up a strategy. Where do I think that these shares, if the market sells them off, where are they going to land? Let's take our crayon out. I think that there's good chance that we retest this support level here, $8.17. That marked the low of May. We had rallied off the lows in April, pulled back in May. That was the market sending us a signal that there were buyers here. We continued to rally off of that level. Now we're probing for a higher low. Maybe that low will be here at $8.56. I tend to doubt it. And the ideal entry point from my perspective is one where we see $8.17 get hit and hold. And if we happen to rally off of that level and close back above $8.56, well, then you'd better back up the truck and begin buying these shares, especially if you have the dollar tanking and oil moving up higher. Let's do a deeper dive weekly chart. You can see that moving into the weekend. The share price here was looking very good. Here's our defined higher low. Here are our four mentioned support levels. And it appears as though we were consolidating very, very nicely at the $8.56 level. And we're ready to move up higher as energy has shown some signs of strength of late. Even if you take a look at a daily chart, while down on Friday, we're still putting in a higher low, holding support, not horrible price action. Now, if we do gap down, you may be saying, you know, why would anybody want this company with all the debt? The sector is a mess. What's going to be the catalyst to send the share prices up higher? Simple. When you take a look at the shares held short, there are 19 million shares held short, which as a percentage of the outstanding shares, not much. Let's face it, one spot, five, five percent, no big deal. But when you take a look at it from the perspective of the average three month daily volume, which is only 4.78 million shares per day, relative to 19 million shares held short as of September the 30th. Well, then add into the potential short number, those who lean into the short side on Monday, assuming that we move downward, and you get a setup when we hit support levels back to a monthly chart, you get the potential for a short covering rally off of one of these two support levels. If in fact they do hold, that is the $800,000 question, right? We don't know if they're going to hold yet. So this is a trade I'd be interested in putting on for the short term, not necessarily for the long term, but for the short term as a swing trade, but the share price must come to us. The bet is here is that we're going to see a pullback on CVE. The question is where do we land? And of course we'll send out a trade alert to members. 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