PetroBakken Energy Ltd. has to wash those sellers right out of its hair!

May 18th, 2011 – Comment

What we really need to see with this stock is a sign of capitulation that washes out all the sellers


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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,
Have your feelings about Petrobakken changed now that it is around the $16 range? Time to buy or avoid?
Thanks,

Marg

Hi Marg,

This will be the fourth time I have analyzed PetroBakken Energy Ltd.(PBN TSX) over the last six months. I am happy to do it because it models exactly what all investors should be doing every single day. If you own a stock or are thinking of buying one you need to  regularly survey the charts and data stream. What you should be looking for are signals to buy, sell, or hold given trends and seasonality.

When I first examined PBN, in October of  2010 it was moving higher but on thin volume and from my experience it looked like a head fake. Which it was. The advance stalled and the shares pulled back. The second time it I took a snapshot of the stock it was a case of being in motion but not making any progress while it continued to lose ground. The last time I ran the analysis it was clear that many investors in the company are not actively involved in managing their investments it as well as they could. You have to pay attention to your money or it will go away!

Lets review what has transpired since March 18, 2011 and see if the charts are surfacing any value.

The three year chart once again highlights the severe downtrend the stock has been in since September of 2009 when it traded at $34.00. The tale of the tape over the last six months has been the story of a stock that just can not hold onto support nor break above resistance. There is also a death cross on the chart that formed in April of 2010 confirming that PBN had lost favor with investors.  You can also see that attempts to move higher  since 2010 have been met with resistance along the 200 day moving average.

The six month chart illustrates the stock’s inability to hold support at $20.50 then at $18.00 and now the question is can it hold $16.00 where the dividend yield is now 6% or do we have to retest $14.00?

Neither the MACD nor the RSI are signalling a shift in momentum from selling to buying. That in conjunction with an established downtrend and a death cross on the chart calls for caution. Nothing hurts worse than finding new lows with your money.

What we really need to see with this stock is a sign of capitulation that washes out all the sellers. Average daily volume on the stock has been 946,521 over the last three months. Over the last 30 days there have only been seven days where the volume exceeded the average. The last thing to keep in mind is that we have just come out of a period of seasonal strength for energy stocks and PBN has not caught a ride on that wave. The next period of strength comes in July so you should put that on your calendar.

If you like the story watch the charts everyday. PBN will eventually reverse this downtrend but you have to be patient. It has not been kind to investors who anticipated a bottom that wasn’t confirmed.

Happy Capitalism!

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