Zak Mir Midweek Missive – Gulf Keystone Petroleum big picture

3 mins. to read

It can be said with little fear of contradiction (I hope!) that the following charting investigation into Gulf Keystone, one of the most widely held stocks on the London market, can be regarded as a very thorough one given the three timeframes my analysis covers. What should be remembered is that very often the  near term mysteries of a stock or market’s price action as far as the daily chart / near term technical’s are concerned, can be explained with reference to the  longer view afforded by the weekly / monthly timeframe. This point was highlighted most recently in terms of the crash of Apple (NASDAQ: AAPL) as the weekly uptrend line at $480 became the likely support zone and then acted as resistance and as was flagged by me here.

As far as Gulf Keystone is concerned on the long view, with the monthly chart, we have the key feature of a rising trend channel from 2006. This channel has its support line running through 180p – clearly providing the implication that any weakness in the shares will be limited to this zone. This area is also site of a multi-year support line that I believe will be difficult to break. Even better is the trajectory of the 7 year resistance line projection as high as 400p plus – a destination which could be retested on a 1-2 year timeframe. Backing this monthly chart’s price action is also the way that since 2010 we have traded constantly above the 50 month moving average now at 137p, an indication of continued strength in the stock. As well as this, there is the persistent RSI oscillator reading around the neutral 50 level over the past three years, not an easy achievement. Combining all these long term technicals leads me to believe that the prospects for Gulf Keystone do appear well backed for at least a return towards the 2012 resistance around 250p.

A surprising aspect of the cross timeframe analysis here on Gulf Keystone is the way that there is perhaps rather more agreement in terms of the conclusions which can be drawn. For instance, on the weekly chart, we have support not only from the same trend-lines seen in the monthly timeframe, with the rising trend channel centred around 180p, but it can also be seen that in the same way that support for the shares on the monthly chart has been strong above the 50 month moving average for the past three years, on the weekly chart we have the price action floating above the 200 week moving average now at 147p. Once again, it is always a significant achievement to hold above a major moving average without the need to test it.  But what may be most relevant to traders in the near term is the blue 50 week moving average now at 206p. This has become resistance so far in 2013, with the implication being that cautious  / momentum buyers may wish to wait on a weekly close back above this feature before going long. Otherwise the message from the weekly chart is that one would be grabbing any weakness towards 180p.

Moving finally to the daily chart and it can be said that on this perspective there has been rather more of a hint here that Gulf Keystone is in a range / holding pattern between 150p – 250p. Nevertheless, the big positive here is the way that there has been extended support at just below the falling 200 day moving average at 199p – an area that actually created a bear trap in December. Using the daily chart, our long entry point is anywhere in the upper mid 190p’s, although ideally we would like to see a weekly close clear of recent 205p -210p resistance before going long. This is of course appropriate to those who are not already nibbling away at the shares around the 200 day moving average. Assuming the 2 year uptrend channel is based at the 200 day line – normally the correct call to make, the 2011 resistance line projection at 270p plus is the implied daily chart.

Gulf Keystone Triple Time Frame Analysis Conclusions:

1. Support Likely To Hold At 180p

2. Momentum Buy Trigger Through 210p

3. Target As High As A 400p Retest Over 1-2 Year Perspective

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