Serica Energy: Rising trend channel points to 40p

I am not sure what the acid test is when it comes to buying shares. However, just a couple of months ago I was thinking of buying shares of Serica Energy (LON:SQZ) for my nine-year old son to illustrate the “magic” of investing on the stock market.

Although technical analysts are notorious for being short-termist, and perhaps having somewhat mixed track records – unless they work for hedge funds – now and again we go for companies which even Warren Buffett would approve of.

Serica Energy was highlighted to me by the coverage of one of the Twitter investors I follow and admire, and a couple of months ago I was particularly impressed by the fundamentals argument. This was largely based on the company’s cashflow and how the market has been and continues to undervalue the shares, hence providing an investment opportunity.


Without wishing to labour the point that this is “the one that got away” I did ask a stockbroker friend to send me the appropriate account opening forms to buy shares in Serica. Unfortunately, he somehow forgot to do so, and therefore the stock is 8p above where my son would have gone long.

The pain is likely to get worse in the sense that, according to a rising trend channel one can draw in from as long ago as July last year, the shares are heading for a resistance line projection target as high as 40p over the next 3-4 months. At this stage only back below the 50 day moving average at 28p would even begin to delay the upside scenario, especially after the multiple support points put in at and above RSI 50 over the past couple of weeks.