Zak Mir on Ophir Energy And Hunting OPHR & HTG

By Zak Mir.

Comparing the chart patterns of unrelated markets can yield surprising results. As with any area of trading, it has to be done properly or can lead you into trouble, but there is an interesting set up with Ophir Energy (OPHR):

What I find interesting about OPHR at the moment is that it reminds me strongly of the gold chart. Just like gold OPHR looks like it is developing a falling wedge pattern and just like gold I would suggest is ready to pop in the coming days. In fact OPHR spiked sharply yesterday, which could mark the end of what has been a difficult period for this stock’s chart. In recent times OPHR has twice jumped strongly off support only to fade away again just as quickly.

OPHR bulls will be hoping that yesterday’s move higher marks a new chapter in the stock’s development. The mauling OPHR has received courtesy of the bears has been long and pronounced. Even so, the trick with OPHR has been to buy it after the second bounce of the RSI uptrend.

This particular play was successful in June and again this week. Unfortunately though the message here has to be that unless there is a big turnaround, this rally could fade again at or below previous resistance. At the moment I would suggest this could occur around September’s high in the upper 340s.

If you are currently long OPHR or are thinking about going long you can take a decent step towards managing your risk against this eventuality. Quite simply put a strict stop loss on and end of day close below the 50MA at 322p,

Hunting (HTG), like OPHR above, illustrates the difficulties of getting a handle on second line oil stock. As with their mining sector cousins, the price action can be some of the most volatile in town:

In terms of the chart of HTG, after an October exhaustion gap reversal there was a bull flag breakout above 800p. The share price then entered into another bull flag this week.

This latest flag looks even stronger than the one earlier this month. The price is actually resting on the “flag pole” itself; a rare setup, indicating a good deal of strength.

Another interesting feature of HTG is the interplay between the 50MA and 200MA support lines. These two moving averages crossed, just as HTG made its low. Known as a “golden cross” this is another extremely strong technical indicator. In trading talks I have hosted over recent weeks I have always recommended to my audience to buy stocks, which exhibit this particular technical trait. As most seasoned traders are aware, this is usually a sweet spot of a trade.

In terms of HTG the entry point for longs is near 800p, with a 10% gain targeted. However, if HTG is able to break through September’s resistance of 877p, then this could take the stock up to the top of June’s prices channel at 940p, by the end of November.