What do you think of Renegade Petroleum? I bought it about a year ago as its fundamentals looked good but it immediately dropped with no apparent change in fundamentals. It is now back to my purchase price. I still like the fundamentals but should I drop it now? How does it look to you?
Bill in Deep River
Thanks for the assignment. Renegade Petroleum Ltd. (RPL TSXV) is developing light oil assets in Saskatchewan, Manitoba, and North Dakota. They have a healthy land position and over 700 drilling locations identified. The company plans on drilling 61 wells in 2012 and expects average production of 4,100 barrels of oil equivalent per day during the year. That would be a substantial increase from the average of 2,500 boepd in 2011. The capital budget for 2012 is $76 million of which $63 million is earmarked for drilling. Clearly they are putting their money where the action is.
A review of the charts will provide additional data to help you with your decision.
The three-year chart depicts the challenges that you and other investors who held the stock have endured over the last year. As we got into February of 2011 a double top formed that signaled the end of the advance that started in August of 2010. The death cross that surfaced in June of 2011 indicated that there was more selling pressure building. By October of 2011 the MACD generated a buy signal and ignited a new advance when the stock caught a bounce off a rock bottom at $1.82.
The six- month chart provides a sharp focus on the advance off the October 2011 lows and ran into resistance at $4.50. What is evident on the chart is that the uptrend line has been broken and the shares are trading below the 50-day moving average. In addition the MACD and RSI are still in a downtrend and not indicating a change in direction. I like the story as well but until the charts are as attractive as the fundamentals it would be prudent to be cautious. With spring breakup just around the next bend it would be wise to take your money off the table and look for a better entry point down the road.
Make it a profitable day and happy capitalism!