Zak Mir on the mid tier oilies…

3 mins. to read

I was reminded yesterday by the founder of Spreadbet Magazine how much he likes trading “problematic” stocks such as Kazakhmys (KAZ). But not far behind on the difficult curve are oil & gas stocks, even the relatively large companies and which I am going to look at on a technical basis here.

First up is Tullow Oil (TLW) and which I know retail traders cannot resist getting involved with – alas, and as ever on the long side. From a charting perspective, since the start of this month, it is understandable that this has been played on the long side given the sharp bear trap rebound from below former December support. The main question now though is whether the intermediate recovery has run its course? Going strictly by the RSI with the oscillator at 56 – well over neutral 50, we should be giving the benefit of the doubt to the long argument. However, the problem here is that the stalling at and just above the 900p level is actually the price action coming up against the top of a falling trend channel from July at 910p currently. The presence of this resistance over recent sessions implies that even if you are an ardent fan of the stock it would be best to wait on an end of day close back above the July line before taking the plunge on the long side. If the post summer downtrend line was snapped on an end of day close basis then the 200 day moving average, now running at 991p would be a viable 4-6 week target for Tullow Oil shares after the break.

Perhaps the most difficult aspect of the price action at Cairn Energy (CNE) is that historically this situation does not perhaps look to be as fiendish as it first appears! Bear with me… In the near term, we have the obviously unhelpful issue of there being a ragged 255p – 295p trading range, with bull and bear traps par for the course in terms of the end points / reversals at support and resistance. In addition, the lack of follow through on the downside in the wake of last month’s 50 day / 200 day moving average dead cross sell signal has not been helpful. The view now is that while the sideways action seems to be dominating overall, the four higher support points since the September 256p floor do imply that base building is well under way. The conclusion is that while there is no end of day close back below the June price channel floor at 262p we could be treated to a retest of post November resistance towards 280p plus as soon as the end of February.

I have saved the “worst” as opposed the best until last with Ophir Energy (OPHR). Bulls have had to decide whether they feel like taking on hedge fund shorters or not. Given the way that the stock is currently languishing at the floor of the 2013 range it would appear that the bears are firmly in charge, despite the occasional sharp counter move rallies. These were especially rampant during July, August and October through to November. Indeed, the November spike which was a one day push through the 200 day moving average is what I refer to as a death trap, meaning that if you are lucky to get on the right side of such a move a significant bear position gain can be forthcoming. The chart now suggests to me that even though the stock is currently at 2013 lows, the unfilled January gap to the downside indicates fresh negative momentum and this could drag Ophir Energy down to the June price channel floor at 270p, perhaps as soon as the end of next month. At this stage only an end of day close back above the 20 day moving average at 311p would even begin to delay the downside scenario.


Comments (0)

Comments are closed.