While it can be said that autumn 2012 has witnessed as much interest in the natural resources sector as ever, few would deny that there has not been quite the response in terms of the share price action – at least in a positive way, that many short-term traders might have wished for. Nevertheless, I have found myself glued to the price action of the likes of Gulf Keystone (GKP), Gulfsands Petroleum (GPX), and Xcite Energy (XEL). In fact, all three of the stocks have been extremely problematic in terms of the recent charting position, a point that can be witnessed very well by investigating the present charting position of Gulf Keystone.
Gulf Keystone
The problem here during the autumn has been the way that in September a bull trap was set with a rise through July resistance at £2.40, as well as above the 200 day moving average then in the 235p zone. This now looks to have been a double sell signal with the unfilled gap of October 4th being the third sell signal. As is clear now this trio of sell signals did not fail although you could almost feel the collective prayers of hundreds of bulls of the stock willing it to go back up (certainly in reading the traffic on the bulletin boards).
Even worse, last month delivered another bull trap just above the former October 194p intraday high, in which the stock stayed above this resistance for long enough to make it appear that the end of the autumn sell off had finally arrived…. However, this attempt at recovery was blocked by the blue 50 day moving average, and the failure here has dragged the stock down ever since. The position now is that we have literally the last line in the sand that I can identify in terms of an uptrend line from way back in August last year – marked out by yesterday’s low of 174p. Presumably most traders are aware of this notional support and there could well be an initial positive reaction. The problem here is not so much the timing of a rebound, but rather if Gulf Keystone is able to bounce meaningfully? The post summer 2011 price pattern would then be revealed as a tall head & shoulders reversal taking Gulf Keystone back down below 150p quite quickly. On this basis the easiest way forward here for would be bulls is simply to wait on an end of day close back above the 50 day moving average, now at 190p before getting long. Or for short orientated traders, sell the stock on a 2 day break of 170p.
Gulfsands Petroleum
A much happier situation is provided by Gulfsands Petroleum (GPX) in which both I and SBM’s editor have taken an aligned fundamental and technical position in this stock, more particularly by me in recent weeks having identified quadruple support a couple of weeks back at just under 80p. I was perhaps a little coy in terms of wanting to see an end of day close above the late November / early December resistance at 85p. In fact, the first end of day close buy was at 92p on December 11th – a high level, but of course given the magnitude of the rise there has been so far, perfectly acceptable.
The view now is the same as it was when the stock was around the 80p mark, and that is that a retest of the centre of the W shaped reversal near 140p is likely to be on is way over the next 3-4 weeks. The initial 105p intraday resistance is the tightest stop loss I can currently see here.
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