As you might imagine, the daily chart of Gulf Keystone is one that I am somewhat familiar with, having followed this stock extremely closely in recent months, This not only because it is one of the most highly followed and widely owned stocks in the UK market but also because, even at the best of times, the technical’s here are challenging to say the least. It is a chartists intellectual battle.
The other issue I have with the Kurdistan focused Oil and Gas producer is its style of corporate governance and the colourful nature of its CEO Todd Kozel. Indeed, the April disposal of almost all his holdings in the company – amounting to £17 million – left me scratching my head in terms of what this actually meant – if anything – as far as the fundamental prognosis for the group. After all, if Gulf Keystone really has more reserves than Royal Dutch Shell (RSDB), why would one want to sell for £17 million now when, in a year’s time or so, this could be worth £170 million, and in 5 years 1.7 billion? The answer of course is that once you have £17 million in the bank you don’t really care about such questions…
Clearly, the market has the same view in the sense that while the stock is lower than it was in April, it has stabilised back above former 2012 support at £1.39 and is threatening to continue this recovery as hopes that there will be a FTSE 100 listing by the end of this year do the rounds – and on recent Shaikan news. But actually, the main reason for discussing Gulf Keystone today is that it suddenly hit me what the chart pattern here is: an Eve and Adam reversal pattern. Bear with me… The Eve part of the pattern is the May floor, with the Adam being the sharper June reversal. This seems to be a widely followed chart signal especially in the US some reason, and I have read about it in a couple of books such as The Encyclopedia of Chart Patterns by Thomas Bulkowski and Master Swing Trader by Alan Farley. It is however little known here.
What is interesting here is not only that the pattern on the Gulf Keystone day chart is clear, but also the way that according to Bulkowski, the average rise after such a formation is delivered can be as much as 35%. This would suggest a return to autumn resistance above 220p. While on a fundamental perspective this is not a company that offers great clarity to me personally, I am happy to go with the message of the technical situation here and at least while the last low at 139p / former 2012 support has not broken, go with the upside scenario.
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