Tourmaline Oil Corp. is range bound in an up channel

May 16th, 2011 – Comment

  Hi Lou, I am interested in Tourmaline Oil whose stock has gone up about $5 since ipo. When would be a good time to “jump in”? Thank you, Marlo   Hi Marlo, Thanks for the assignment. I last posted on Tourmaline Oil Corp. (TOU TSX) on January 28, 2011 for Audrey. At that time […]


About the Author

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.


Read the author's full profile.


Further Research

Read more about Energy.


 

Hi Lou,

I am interested in Tourmaline Oil whose stock has gone up about $5 since ipo.
When would be a good time to “jump in”?

Thank you,

Marlo

 

Hi Marlo,

Thanks for the assignment. I last posted on Tourmaline Oil Corp. (TOU TSX) on January 28, 2011 for Audrey. At that time there were three factors that I observed. The first was that the stock was coming into a sweet spot when we consider seasonality. Energy stocks enjoy a period of strength from early February to early May. Another factor  was the formation of what appeared to be a pennant which is a continuation pattern. And finally it looked like the stock had to pull back after a rapid rise from its issue price of $21.00.

Lets revisit the charts and examine what has transpired and what may be in store for this stock.

The one year chart provides a view of the support that TOU has established along the 50 day moving average. It also appears that the shares have developed a range bound pattern in an up channel. After January 28, 2011 when I originally published the post on TOU the stock did pull back and then completed the pennant pattern leading to a continuation of the advance for a 14.58% gain to the April high.

The six month chart depicts the move from $24.00 in late January to the high of $27.50 in late April. The stock has tested support along the 50 day moving average twice and caught a bounce. That tells me that investors want to own this stock and are actively buying on the dips.

Now that we are into May and the next seasonal sweet spot for energy doesn’t come until mid July you will want to watch support along the trend line like a hawk. Currently the MACD is turning lower suggesting that the momentum towards the sell side that started in late April is continuing.

When I look at TOU I see a company with a management team with a long track record of success in developing energy reserves and production. They intend on aggressively drilling up their large land position. On April 13 they reported that they had reached 30,000 barrels of oil equivalent per day of production which beat their earlier guidance of 27,500 boepd.

 In addition investors have an appetite for TOU shares. On April 25, 2011 the company reported a $161.3 million bought deal offering which in my experience suggests that there is confidence in the company from the professional community. Having said that the biggest rub for me at this time is the seasonality. I would let the selling dissipate and see if support holds along the bottom of the channel in the $25.75 range. If it does you can catch a ride to resistance at the top of the range.

Long term its a solid prospect with proven management.

Happy Capitalism!

Categories: Energy
Content © Relentless Economics - Charts courtesy Stockcharts.com - Employees Entrance - Optimization Media