Open Range Energy Corp. under selling pressure

Jan 11th, 2012 – Comment

At this point it would be best to wait for the downtrend to reverse before buying.


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Hi Lou,
Coming to your blog is always insightful. I was looking at a few junior Oil/gas exploration companies and narrowed down Open Range Energy on the basis of growth in 2012.It would be great if you could enlighten me with your views.

Thanks,
Nadeem

 

Hey Nadeem,

On July 29, 2011 I ran the charts for Open Range Energy Corp. (ONR TSX) on an assignment from Joe. At the time the shares were trading for $6.49. It was suggested that the combination of the exploration and production side of the business and the Poseidon Concepts water handling unit had more in it and that investors should let the horse run.  Retrospectively that was the right call.

In November of 2011 the company reorganized its structure and spun out Poseidon Concepts Corp. (PSN TSX)  to existing shareholders. The results if you look at the closing prices of both shares produced a combined value of $13.51. Not a bad return in six months.

Now ONR is a pure play exploration and production company. A review of the charts will provide greater insight into the prospects for the shares.

 

 

The three year chart tells the story of a stock that peaked in November after the lift that started in October on the announcement of the intention to reorganize. The uptrend that was in place has been breached as well as the 50 day moving average. The MACD and RSI also indicated that it was time to capture profits.

 

 

The six month chart provides a close up of the selling pressure that has gripped the stock since the November high. Presently the MACD and RSI are suggesting that the selling pressure it not about to abate.

At this point it would be best to wait for the downtrend to reverse before buying. The company reported its 2011 exit rate of 6,350 barrels of oil equivalent per day on December 22, 2011. Management expects to exit 2012 with 10,000 boe a day and will be reporting its capital budget for the year soon.

ONR has some interesting drilling targets on its land base and is worth keeping an eye on but you will have to be patient to get the most out of your investment.

Make it a profitable day and happy capitalism!

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