Zak Mir on oil stocks du jour – CNE, PMO & OPHR

Crude Oil’s recent double top at $105 may have been a frustrating affair for bulls of this commodity in the wake of the geopolitical tensions in Ukraine, but of course this does not necessarily mean that equities based on this particular asset class have to break down as well.

In the case of Cairn Energy (CNE) part of what may cushion the stock from further downside is that we have already been punished by the Indian tax dispute and which has resulted in a $300m share buyback being put on ice. The question now is whether the beating already received by the stock factors in all the negatives or whether we could be treated to at least an intermediate rally.

Unfortunately, the charting position at the moment is largely biased towards the sell into strength view. This is said in the wake of the latest third main failure by the stock to clear the late March dead cat bounce peak of 174.8p on no less than three occasions.  The suggestion here is that even if you are a bargain hunter, waiting on an end of day close back above this resistance would be the “minimum” buy trigger, even though the October resistance line break in the RSI window at 42 is a potential early bird bull signal.

At the same time, while the near term trend for the stock has been down and continues to be to the downside, it may be that shorter’ should wait on an end of day close back below the 20 day moving average at 167p as their new trading trigger to re sell. While this may sound like something of “an each way bet” situation, the reason for the equivocation is that the shares have notched up nearly a month now in consolidation mode largely within a 160p – 170p band. This is a similar consolidation to that seen during February before the plunge in early March. Although the RSI configuration described above suggests that at worst we may only retest the 149p March low, rather than break it.

Ophir Energy (OPHR) is a company which I find hard to resist taking a charting look at, not actually because it is a particularly kind candidate for price action prediction, in fact quite the opposite. No, the present position, at least in recent days, is perhaps a little easier than the “mission impossible” we are accustomed to normally with this stock. The key in the near term looks to be a set of rebounds in recent days off the floor of a falling price channel from August last year heading towards 220p. This is added to be the weekly close back above the former March 232p floor with quite a flourish. The expectation now is that at least while there is no end of day close back below the support of last month the upside here should be towards the floor of the March gap floor at 265p. The timeframe on such a move is the next 2-4 weeks.

The slide which recently ended for Premier Oil (PMO) shares began with an early 2013 triple top through the 400p zone. The trigger for the turnaround was an inverted head & shoulders formation in place from the end of November to the beginning of this month. The position now is that following the extra bounce / bear flag rebound off the 50 day moving average now at 303p there is likely more upside, certainly while there is no end of day close back below the last April intraday resistance at 313p. What with the weekly close above the 200 day moving average the bull scenario is intact here. The favoured destination on a 1-2 month timeframe is as high as a late October price channel top at 380p and this is backed by an uptrend line in the RSI window running at the 50 level currently.