ShaMaran Petroleum Corp needs to move from evaluation to action

May 4th, 2011 – Comment

Until the company announces a more active drilling program this one is in a holding pattern with a downward bias.


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Your opinion please on ShaMaran pete ( SNM )venture ex. The chart shows a wedge pattern and an impending death cross. Is it possible to predict a breakout (up or down)?

George

 

Hi George,

Thanks for the assignment. ShaMaran Petroleum Corp.(SNM TSXV), which is part of the Lundin Group, is actively working four major blocks in Kurdistan with a 60 % working interest in two of them. The company raised $50 million in September, 2010 at $0.45 a share and on April 19, 2011 announced that they intended on raising another $50.4 million at $0.90 per share. The April financing followed the April 13 announcement of a major oil discovery on the Atrush block where they have a 26.8% interest. The well tested at 6,313 barrels of oil per day with the potential for greater output once put onto production.

The charts will provide guidance as to the potential of a break up, or down for the stock.

The three year chart illustrates the move up starting in September of 2010 when SNM was trading at $0.40 all the way to the high of $1.40 in late December of 2010. Quite the nice present under the tree for investors who caught the ride. 2011 was not nearly as attractive as the stock pulled back to the rock bottom price  of $0.60 in March.

The six month chart depicts the triangle or wedge you mentioned and from my interpretation it suggests that SNM is at risk of breaking down from these levels. The pending death cross should  not be ignored. In addition neither the MACD nor the RSI are signalling a move higher.

You asked about predicting a breakout and the best answer I have is to re-frame the language. When I evaluate the signals generated on a chart I see it as a way of reducing the risk of being wrong and improving the risk of being right. All decisions have risk and many signals can prove to be false.

SNM is at a stage in its development where it is establishing a list of targets on its land position in Kurdistan. From my research they have drilled a first commitment well at Pulkhana to evaluate the reservoir and intend to drill three wells over the next 36 months. Until the company announces a more active drilling program this one is in a holding pattern with a downward bias

Happy Capitalism!

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