Tourmaline Oil Corp. following natural gas lower.

Apr 16th, 2012 – Comment

At this point you need to consider capital preservation.


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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.


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Hi Lou,

Could you please comment on Tourmaline Energy,both short and long term. I have held the stock for some time now,and it seems to be sinking lower on a weekly bases. I am wondering whether to hold on, as it seems to have good future prospects.

Thanks,
Jim

 

Hey Jim,

This will be the third time that I have undertaken an analysis of Tourmaline Oil Corp.(TOU TSX). The first occasion was January 28, 2011 on a request from Audrey. The shares were trading for $24.00 and it was observed that there was a stick and pennant pattern on the chart suggesting that the uptrend that the shares were enjoying would continue. As good fortune would have it that is exactly what happened.

The second time I ran the charts was on May 16, 2011 when the shares were trading for $26.48. Marlo wanted to know if it was a good time to catch a ride given that it had added $5 since its initial public offering in November of 201o. It was noted that the shares were in an up channel and that they looked to add more value. And once again it was the correct analysis.

Unfortunately trees do not grow to the sky and the shares of TOU have given back a lot of their hard earned gains. A review of the charts will provide some of the information you need to make a decision.

 

 

TOU is a natural gas focused company and that has caused lots of problems as the mild winter in North America and new supplies of shale gas have cratered the price of the commodity. The three- year chart for natural gas says it all. Lower highs and lower lows do not a pretty picture make.

 

 

 

 

The three – year chart is the perfect case study with the take away of booking profits when they are available. Taking a stock from a $21.00 IPO to a high of $36.00 and then giving it all back is the type of crazy making that we look to avoid by watching our investments every single day.

 

 

 

 

The one year chart provides a close-up of the action as the uptrend that started with the IPO was breached in August of 2011 as natural gas broke below $4.00. The MACD and RSI both signalled a shift in momentum. The shares were trading sideways in a range with support at $30.00 and resistance at $35.00 until mid December 2011 when aggressive selling became the tale of the tape.

 

 

 

The six-month chart is not providing a better outlook. None of the indicators are suggesting a reversal of the current downtrend. At this point you need to consider capital preservation. If you really like the story and there are lots of things to like with TOU you can always get back in when the trend starts to move up again.

 

Make it a profitable day and happy capitalism!

 

 

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