While it may be something of an exaggeration to say that I am obsessed with the oil & gas sector – especially the minnows, this is not in fact, far off the case. Clearly, as far as anyone who is brave enough to look into this high risk area of the market, the real challenge, of a North Face of the Eiger variety, has to be to try and make a call on those oil plays further down the market cap pecking order and which has been the stuff of broken dreams for many a retail punter this last 12 months as the AIM Oil & Gas sector has plumbed new lows.
When covering the speculative favourites from this area you can almost hear the collective audible joy from the trading public when a call leads to a 20% plus move to the upside, and of course the anguish when the rug is pulled. I have to say that I am usually biased to the upside and this should indeed be the nature of the game as far as explorers are concerned as I tend to only write about those companies when there is a decent chance of a positive spike. That said, the three stocks in today’s blog have been chosen for their charting interest in general rather than just as being “buy, buy, buy” opportunities…
The charting interest as far as Dragon Oil (DGO) is concerned is the challenge of attempting to determine where the floor of the price channel is on the daily chart. I normally make a beeline, so to speak, for the area of the 200 day moving average in such circumstances. On this basis, the best line of fit to get oneself long looks to be between the 50 and 200 day moving averages at 560p. The suggestion is that while there is no end of day close back below the 50 day moving average at 553p then the upside argument and a return to the site of the 2012 620p resistance is favoured – especially so after what was a vicious bear trap from back below the August intraday low of 524p. The time frame is the next 4-6 weeks.
Leni Oil & Gas
With Leni Gas & Oil (LGO) we have another convoluted chart in terms of trying to establish just where the trend channel for these shares is… My best call on this is the artistic creation you see before you in that we have a June uptrend line running through the 1.15p mark. This line has been tested at least four main times in the past three months. The hope, indeed, the likelihood is that Leni will not require a fifth test of the June line and will go on to test former November glories as high as 1.80p. That said, my main target here on a 3-6 month perspective remains a clearance of the 1.8p zone and for the stock to hit the top of the 2012 trend channel by that time.
Finally, we have Sound Oil (SOU), where it is to be hoped that after the shares retraced the October peak over 14p by more than half that there may finally be a recovery. In fact, it is hard to believe that there would be any stale / weak bulls left here after such a large pullback. Therefore, the best way forward here for those who believe the long argument should be to bank on the floor of the July uptrend channel / 200 day moving average at 9p holding. While this is the case on a weekly close basis, the upside here is seen as being at least a return towards pre November resistance at 12p plus. At this stage any weakness towards the 200 day line is regarded as a buying opportunity.
IF YOU’RE INTERESTED IN MORE OIL STOCKS AND BOTH SBM AND MY ANALYSIS ON THE MARKETS, CLICK BELOW FOR YOUR FREE GUIDE
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