Petrostar MACD Doesn’t Support Trend Reversal

Sep 23rd, 2008 – Comment

Hi Lou I e-mailed you and asked about PEP and appreciated your response. I decided to speculate on this company based on the fact that they are in the Bakken. They have drilled in the area and according to NR’s they have a discovery well. Since releasing this news they are testing their two initial […]


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Nice bounce off a pennant formation

MACD doesn't support trend reversal - wait for more info

Hi Lou

I e-mailed you and asked about PEP and appreciated your response. I decided to speculate on this company based on the fact that they are in the Bakken. They have drilled in the area and according to NR’s they have a discovery well.

Since releasing this news they are testing their two initial wells under a tight hole policy. My question is. Should I be worried and can the company apply for a tight hole policy if the well is a duster. I researched this on my own but couldn’t find any answers. Your reply would be greatly appreciated.

Thanks
Lou

Hi Lou,

From July 23 when I last looked at Petrostar Petroleum Corp., PEP TSXV it got a nice bounce off the pennant formation I mentioned which produced a nice profit if you captured it. PEP has found something on the Bakken drilling and now the question is what and will it reward shareholders.

A tight hole policy is put in place to give a company a chance to tie up more land in the area of the discovery and better position themselves to benefit from their effort. The last thing you want is to lose control of a nice reservoir by letting someone stick a straw in it from an adjacent section when you spent all the money and brain power finding it. But keep in mind that a tight hole doesn’t mean information isn’t getting out just that the company isn’t putting it out directly.

The oil industry has scouts out in the field driving around areas where permits have been issued and rigs booked for drilling to see if they can scare up information. To your question would a company try to hold back information on a dry hole?

It wouldn’t serve them to do so because if it came out that they held back material information it could hurt their most valuable asset. Their reputation! I’m not saying it hasn’t been done but I wouldn’t suggest it in this case.

As to whether you should be worried. You should always be watching over your investments and conduct due diligence to justify your position. From the charts it looks like $0.30 is providing support but the MACD is turning down which doesn’t support a trend reversal. At this point you are hanging on for more information.

Just one more thing Lou, remember you have to trade these juniors and capture profits when available. The charts show a pattern of popping and dropping. Book profits when available!

Happy Capitalism!

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