Gulf Keystone, Xcite Energy And The Conditional Tense

By Zak Mir.

While the world waits to see whether or not U.S. government departments will shutdown, it is perhaps a better idea to look at what really matters in life. And what could matter more than the current share price of Gulf Keystone (GKP)?!

GKP is a stock, where use of the conditional tense is an absolute necessity, when attempting to evaluate its chart. In the wake of April’s controversial share sale by CEO, Todd Kozel, the technical view was that a move below 100p seemed quite possible. This was because the daily share price was struggling below December’s support of 161p. Then suddenly, against the odds some might say, things started to turn around. GKP improved its corporate governance structure, managed to see off Excalibur and appeared to have knocked itself into shape to become an A-list contender to join the FTSE350.  

However, trying to predict what might come next, from a technical perspective, is a tougher call. There is a valid argument that the recovery, from the dark days of April, has now priced in much of the possible good news. Equally though, the recent moves in the stock price could suggest GKP is heading higher, once again.

Everything hinges on the floor established during September’s gap to 193p. In fact, I had been planning to describe GKP as a bearish contender, in the event of a close below that gap yesterday. As it turned out, GKP closed above this level and we have now seen an affirmation of 2013’s great rebound. This view is supported by the manner in which the share bounced off its 50MA at 186p.

For now, the bulls will be hoping that the break in the RSI uptrend is a misfired sell signal. These indicators can be something of an early bird warning and can be overly sensitive. As long as there is no close below the aforementioned gap, then GKP could be on the path to hitting the 240p target we pencilled in, after the gap higher on September 11^th. This could happen by the end of October.

While it could be fair to say GKP has experienced a bit of a blip in its move higher, the experience for owners of Xcite Energy (XEL) has just become downright frustrating:

Fans of the North Sea oil explorer are still waiting for that ever-elusive big and lasting break to the upside.

Probably the best way to play this situation, though, is to focus on the combination of a red broken resistance line from March and the 20MA both coinciding at 115p. At least so far, we have seen the shares find support at this point, which effectively suggests that former resistance is coming in as new support. The chances are that there will be further attempts to move higher. This is dependent on the 115p price line being held and the RSI uptrend line in the oscillator window remaining just above neutral 50.

The 2013 price channel top at 140p is now the target. This means there is the potential for 20p plus of upside over the next month, even if the reading of the current chart implies Xcite could fade back below 115p.