PetroBakken Energy bouncing off a rock hard bottom

Jul 25th, 2011 – Comment

Some of the commentary on the move up from $12.40 on July 19, suggested that investors who had shorted PBN were buying to lock in their profits.


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Hello Lou,

You seem to have some insight on PBN. Last time we spoke you were talking about a head fake on this one. It seems a new bottom has been reached and I am wondering if we are closer to an entry point. I own some of this already and am using it as a dividend yield/long investment. It is tempting me again at this level.

Thoughts?

              Frank

Hey Frank,

I do recall our email exchange on the head fake headline published on October 15, 2010 on an assignment from Heather.  The stock was trading at $22.02 at that time. Unfortunately the shares went into a steady decline and  gave up a lot of ground. This will be the fifth post on PetroBakken Energy Ltd. (PBN TSX) since the original analysis.

Let’s look at the charts to see if the itch you want to scratch is worth the risk.

The three year chart is a classic example of an established downtrend shredding investor value. The shares peaked at $34.00 in October of 2009 and have been struggling ever since.

Some investors want to argue that the fundamentals are great and the company has huge potential. But ask yourself this. If the stock is going down and has been for close to two years does it matter? Also worth a mention is that in a downtrend there is the temptation to anticipate a bottom instead of confirming that the selling is over and investors are willing to buy the stock. Since the release of the first analysis on October 15, 2010 PBN is off over 30%. That always hurts.

 

The six month chart although generally not very impressive once again oozes temptation. The move off the rock bottom that started on July 19, 2011 appears to have broken the trend line that started in early March. In four of the last five days the volume of shares traded exceeded the average daily volume of shares over the last three months.

Some of the commentary on the move up from $12.40 on July 19, suggested that investors who had shorted PBN were buying to lock in their profits. If that is the case its a good sign.  When the shorts move out it allows the buying to get some traction.

There is also a pennant forming on the chart which is a continuation pattern. In the majority of cases the stock will move higher out of a pennant formation. Not to be ignored is the 50 day moving average which is a resistance level that has to be breached if the stock is going to advance further.

 

At this point with the MACD and RSI indicating a shift in momentum, the shorts on the buy side, a pennant formation on the chart, increasing volume, a 6.6% yield, and the energy sector entering a period of seasonal strength, it looks like its time to scratch your itch.

Be advised that the release of Q2 results is scheduled for August 10.

 

Make it a profitable day and happy capitalism

 

Categories: Economics, Energy
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