Backs To The Wall: Victoria Oil & Gas/Xcite Energy

By Zak Mir.

For some strange reason I have a soft spot for the shares of the smaller oil and gas plays. There is rarely a dull moment with these stocks and the wild swings can be extremely invigorating. I love the intrigue and speculation that can go hand in hand with trading at this end of the market.

Victoria Oil & Gas (VOG) is typical of this kind of play:

What interests me about the VOG chart is that, despite all the huffing and puffing of the share price (and presumably the hot money trying to make a decent turn), the price has been unable to make a sustained push beyond the 50MA, currently at 1.1p. Indeed, as things stand this stock looks like it is about to enter a new bearish phase, after the sharp drop from the 50MA and the descending March price channel top. As long as there is no weekly close back above this 7 month line, the stock looks set to continue its move to the downside and will probably retest October support at 0.9p over the next 4-6 weeks. Additionally, the share price is not helped by the extended RSI resistance line in the 50-55 zone, just above 50. This is probably the worst harbinger of further declines the oscillator can generate. If this proves to be a correct signal then I would not be surprised to see VOG fall more, with the 2013 price channel floor as the target. This could happen as soon as the end of January.  

Moving onto Xcite Energy (XEL), like its compatriot Gulf Keystone (GKP), it is probably advisable always to give this stock the benefit of the doubt. After all, given its passionate following of private investors, failure to do so could easily lead to pistols at dawn!

Unfortunately though, looking at the XEL chart and it appears that unless there is a miraculous turnaround on the fundamental front, we are looking at an intermediate breakdown. I form this view on the basis of the break below the 200MA at 108p and a May support line at 106p. This double failure looks bad and unless some newslow comes riding to the resuce, we could well be looking at a target of 75p, which is the floor of April’s falling price channel.

In fact, the only technical “get out of jail free” card for XEL comes as a result of the sideways movement of the stock over recent months, with any dip below 100p apparently attracing buying interest. Although this isn’t exactly regular enough to be able to set your watch by, it can often be the case that even the most sophisticated technical analysis is trumped by a very simple range-related call on a stock.

Even so, being an early bird bull might be something to avoid on XEL just for the moment. It would probably be wiser to wait for some tangible signs of recovery in this stock, with an end of day close back above November’s support of 102.5p, before taking the plunge and going long.