Love Hurts

Jun 26th, 2009 – Comment

I would appreciated your  opinion on  the  “TECHNICALS”  for  Gran Tierra Energy ( GTE TSX). Thank-you in advance for  your insight. Ben Hi Ben, You have picked a company that from a fundamental basis you want to love. I went over their Q1 2009 report and from an operations point of view and their financial results things […]


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granI would appreciated your  opinion on  the  “TECHNICALS”  for  Gran Tierra Energy ( GTE TSX).

Thank-you in advance for  your insight.

Ben

Hi Ben,

You have picked a company that from a fundamental basis you want to love. I went over their Q1 2009 report and from an operations point of view and their financial results things look like they are going very nicely.

In Q1 2009 production was up 265% to 10,390 barrels of oil per day (BOPD) from 2008 levels. Net income rose 202% to $14.1M over the same period. GTE is sitting on $147.7M in cash and has no debt. That kind of performance is what creates wealth. But keep in mind that, even though the company as a great land position in the Putumayo basin in Columbia where the bulk of their success has come from, at some point the growth in output has to flatten out.

I don’t want to kill the buzz but lets just remind ourselves that trees don’t grow to the sky and falling in love with a stock can lead to denial. I have a pal who fell in love with a stock and ended up with $70,000 worth of wall paper. There are three ways to lose money. Bet on slow horses, chase fast women, and fall in love with a stock.

gte

Having said that lets look at the chart. GTE hit resistance at $4 and has support at $3.60. For a further run to the upside the stock has to break above $4 with conviction. After that there is not much to keep it from running to $5. Then just a bit of resistance to $6.00. And as your chaperon at the dance these are resistance levels not guarantees that GTE will get through them.gte32The three month chart nicely illustrates the MACD generating an uptrend in Mid May which from the low of $2.90 to the high at $4.00 produced a healthy return of nearly 38%.

There is also a golden cross about to develop which indicates that the uptrend could continue. What you should be looking for Ben is a trend that you can ride. Given the volatility in the market, political risk in the areas of South America that GTE operates in, and the fact that there are close to 250 million shares outstanding, you have to find opportunities to trade this stock for profits when they are available.

Happy Capitalism!

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