Zak’s midweek thoughts – AUL, GKP, AVN & NOP

The “theme” for today’s blog is very simple (not!) those charts and markets that tangle you up in indecision… Let’s start off with the relatively clear example of Aurelian (AUL) where there is little doubt that a recovery has been in place since September when there a bear trap just below 8p. The implication of this price action is that while there is no end of day close back below 8p then we can expect significant upside from an extended reversal formation. While it may be seem rather ambitious at this point, a swift break of the August 10 .5p resistance should lead rather quickly to the black 200 day moving average just above 14p. The timeframe is probably no later than the end of December –  a potential nice Xmas gift.

Another positive situation today has been seen in Northern Petroleum (NOP) – a stock that was highlighted by this magazine back in the July edition (page 57) link here – http://issuu.com/spreadbetmagazine/docs/spreadbet-magazine-v6_generic. After months of dithering and attempted base building we have also seen a bear trap rebound back above a June support line at 64p. The implication of this is that while there is no end of day close back below 64p we could see a further rebound back towards the top of a four-month rising trend channel at 77p. If this target was reached there would be enough momentum behind the shares to indicate a lasting turnaround in our opinion.

Now let’s move onto the not so easy situations. The first is the punters perennial favourite – Gulf Keystone (GKP).  For much of today, we saw the shares hovering just below the 200p level and seemingly set to break the main support line from June nominally running through to £1.98. In fact,  the bulls were let off the hook with a rebound back above 200p, and it could be that they are treated to an intermediate test of the blue 50 day moving average at £2.16. Nevertheless, before they breathe too much of a sigh of relief they should remember that the unfilled gap just below the black 200 day moving average at £2.36 at the start of this month is a potential stalling point.

There was another problematic situation today in the form of Avanti Communications (AVN), where the market is presumably looking to see whether the former June intraday low of £2.81 will hold or not. Just make things rather more challenging the shares have been oscillating either side of this number on an intraday basis over the past week. Nevertheless, with four consecutive end of day closes  below £2.81, one would suspect that the bears will force a test of the last main support here, just under £2.40 from April.  But what should be added in the case of both of Avanti and  Gulf Keystone, is that it is very much a rule of trading that if there is even a modicum of doubt you are better off standing aside rather than attempting to solve the riddle by risking hard earned cash!