PetroBakken Energy Ltd. in motion but not making progress

Jan 31st, 2011 – Comment

Until the stock begins a new uptrend don’t get married to the story. The trend is your friend till it ends and right now its a downtrend.


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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Hi Lou,

I would like to know your opinion on PBN TSX as three  months have passed since the head fake article.
Thanks
Al

Hi Al,

I last commented on PetroBakken Energy Ltd. on October 15, 2010. At that time I did say that I thought that a bounce off the 50 day moving average felt like a head fake and as it turned out after a brief advance to $23.50 the stock sold off to a low of 18.50. PBN has recovered, trading at $21.12 at the close on January 28, 2011. Unless you are trading the stock its a classic case of being in motion but not making much progress. The charts will provide a better sense of direction for the stock.

The three year chart illustrates the sell off that has been in place since October or 2009 when PBN traded at a high of $35.00. Also evident is the resistance along the 200 day moving average. Every time the stock has tried to breakthrough the resistance it has failed.

On January 10, 2011 PBN announced that it intends on spending $800 million to increase its production to between 46,000 and 49,000 barrels of oil equivalent per day from 42,500. Spending  close to a billion on the initiative they have to manage the risk that oil prices soften putting a squeeze on their cash flow.

The six month chart depicts the stomach churning swings in PBN since October, 2010. The MACD signalled the move off the bottom at $18.50 in late November  and the selling that emerged in late December.  Once again we have a situation where the stock is testing support along the 50 day moving average.

At this point I would continue to monitor the stock given that there is a period of seasonal strength in energy that begins in late February and runs till early May. If it starts to make a move to the upside you could catch a ride as it comes into its sweet spot. But don’t be fooled.

If you want to make money with PBN you have to trade it. The stock has failed to make a sustained move higher despite oil prices moving nearly $20.00 higher since October 2009 when PBN began to sell off. Its a given that the company has been busy with acquisitions needed to lock up drilling targets. In addition its recognized that PBN intends to drill up a storm in 2011. Until the stock begins a new uptrend don’t get married to the story. The trend is your friend till it ends and right now its a downtrend.

Happy Capitalism!

 

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