A Zak Mir Falkland Oil & Gas Post Mortem

3 mins. to read

I’m not sure whether this post-mortem on the Falkland Oil and Gas share price collapse is more appropriate to CSI or the X-Files?  Either way, for punters in FOGL and indeed other Falkland oilies, this year, it has been a rather painful experience to say the least..!

It certainly looks like the mini mania associated with AIM resources stocks in general, and specifically those with exposure to the South Atlantic, has welll and truly stopped and the music ended…

To start with, I’m stepping back and looking at the past 18 months with Falkland Oil and Gas shares. This week’s large gap down was right through the previous intraday low of 41.75p in October 2011. Coincidentally, Tuesday’s (27th) intraday high was 41.75p. This means that we have, in theory, tested former support as new resistance with the message being that unless until there is no end of day close back above this level, you are quite simply catching a falling knife that could well keep on falling if you attempt to bottom fish the stock.

On the positive side, there is an RSI support line running through the 20 level and which may halt the downside around the current levels. There is also a falling May price channel floor at 33p. The problem is that yesterday’s (28th) intraday high at that level suggests that 33p  has now also become resistance and there could well  be further downside from here. Indeed, turning the situation around, if you were smart enough to be short of the stock, reacting to the November bull trap through October’s 69p peak, I would guess that you would be one of the few happy traders of FOGL right now.

As this is a charting post-mortem(!), I thought it would be appropriate to look at the state of the chart immediately before the bolt from the blue regarding the Scotia well to see if we can glean anything from this. What can be seen on the daily timeframe was last Wednesday’s (21st ) end of day close back above the former 58p October low to give a bear trap buy signal as the share price recovered previous lost support. If you were caught but this, you may have gone long the following morning at 65p. The smoke signal last week was that on both Thursday and Friday last week Falkland shares were unable to close back above the 65p level, with the 70p intraday high of November just bull trapping October resistance at 69p. If you are strict technical trader, there was in fact the signal to go short of Falkland irritatingly soon after the buy message had been delivered. But did it appear that there was any reason to rush in on the short side? No. The negative drilling result on November 27th caught many no doubt.

This example illustrates very succintly the problem that many technical traders have, whether trading intraday or on a swing basis that this is that there may be quick successive signals forcing you to decide whether you want to flip an existing position or not for a small loss. This hard for us mere humans to do. If you decide to wait, or do not feel like taking a small loss, as this example underlines, that rather than losing a penny, you could be offside by 30p or more. The message is that once you set up a method of trading, you have to stick with it through the good and the bad.

If you’d like to learn more about “bull & bear traps” and my top technical triggers then visit the Trading Guides page of this site to receive my FREE Top 25 Technical Triggers guide.

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