Zak Mir oil minnows special – Ruspetro, Gulfsands & Bowleven

It may be a reflection of our respective personalities, but whereas I was looking to focus on three second line oil stocks which have recently been flying, the founder of Spreadbet Magazine suggested that I look at three beaten down plays in this sector. In fact, the reason that I was going for the “winners” is that along with trading guru Francis Hunt, the only man to call Gulfsands Petroleum right, I have the belief that Crude Oil is going to enjoy a sharp revival, at least in the near term.

But perhaps more on that in a future blog? Instead, for now we are looking at the price action pain and misery for stale bulls of the stocks that has been served up by Bowleven (BLVN), Gulfsands Petroleum (GPX) and Ruspetro (RPO). Given how dire the price action of all three of these companies have been of late, it is actually difficult to know where to begin. Alphabetical order looks to be the most appropriate approach!

It must be said that with Bowleven (BLVN) we have a stock and company which I have had a rather soft spot for. This has usually meant giving the share price the benefit of the doubt when looking at it from a charting perspective (note to oneself – do not be sentimental in future!). Such an approach did ironically work rather well in the first quarter of last year, when the technicals were boosted enough by an unfilled gap to the upside and a golden cross buy signal between the 50 day and 200 day moving averages that we were treated to a temporary push through the 100p level in March. But since then, it has been downhill all the way, with the situation so dire that one would be only buying on a day like today when a new near term low has been made and there is a chance of a temporary bear trap revival. Nevertheless, the best that can be said currently is that the absence of an end of day close back below the intraday floor of this week at 32.10p could lead to a squeeze back to the 50 day moving average zone at just under 38p over the next 2-4 weeks.

The only real surprise as far as Gulfsands Petroleum (GPX) is concerned is the way that despite its exposure to the Syria meltdown, the stock price actually has, in recent weeks, put in a pretty defiant performance. Indeed, this was a reminder that very often the most bearish of situations tend to defy the cynics – giving the impression that the negatives have been factored in, on occasion before the plunge finally appears… The position now as far as this explorer is concerned is that we are looking at potential ongoing losses within a descending price channel from May last year. The problem currently is that even though we see the RSI reading at an ultra low 14 – something which suggests a dead cat bounce is imminent, one would probably regard any rebound as a cue to go short. Indeed, only an end of day close back above the 20 day moving average – currently at 39p would probably be enough to delay a 2013 support line target as low as 22p, perhaps over the next 6-8 weeks.

Finally, I am looking at a stock where we were kept guessing as to whether it was a recovery play or another ongoing meltdown which was shaping up on the daily chart over the course of 2013? Ruspetro (RPO). Unfortunately, recent developments to start 2014 indicate that this is a situation where it is difficult to rule out a retest of the 2013 support from March last year before any lasting rebound is delivered. That said, there may be some brave traders who go along with the support line projection I have drawn from last year towards 18p and may feel like bargain hunting a little towards that number. That said, it is admitted that as little as an end of day close back below the 2013 price channel floor would probably lead to sub 15p within just a few days. However, if the bottom fishing theory is correct we may bounce back towards July’s 25.5p floor ahead of any sub 15p retest.

Disclaimer – Spreadbet Magazine contributors and related Titan funds are long all the stocks mentioned here.