Talisman Energy too weak to chase

May 14th, 2012 – Comment

At this point TLM may have to retest the five year lows around $9.19. Until there is a trend reversal I wouldn’t be chasing this one.


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,

It has been a roller coaster out there as you know, but there is one ride at the park that seems to have only one direction- down. Talisman continues to fall.

Is it because of their heavy gas exposure, market sentiment, both or something else. I heard from some guy many years on TV and radio that you don’t want to catch a falling knife. Ha ha.

Greg

 

Hey Greg,

I last conducted due diligence on Talisman Energy Inc. (TLM TSX) on June 22, 2009. Haig gave me the assignment when the shares were trading for $16.75. The conclusion was that the stock was setting up for a pull back which it quickly did back to $14.00.

Regarding the company’s production it is a 50/50 split between oil and natural gas. The pain inflicted on investors since early 2011 is not entirely a question of what they have coming out of the ground.

A cycle through the charts will provide some of the information needed to  help you with your investment.

The three-year chart depicts the the trend reversal that began in late January of 2011 followed by a double top in February of the same year. The breach of support at $22.00 signalled to investors who understood the implications that it was time to preserve capital and get off of the ride.

The death cross in June of 2011, when the shares were trading just above $18.00, was another red flag that things were not going to be getting any better very quickly.  For a brief moment in early 2012 there seemed to be a slight glimmer of hope that the downtrend was broken but it was not to be and new lows were plumbed.

 

The six-month chart illustrates the continued weakness in the shares. We did get small bounce off a double bottom that formed in mid December 2011 and mid January of 2012. The move generated a 23% profit bottom to top, but it didn’t last. The MACD and RSI both indicated that the top was in and it was time to hit the silk.

What is also worth noting is the resistance along the 50-day moving average that started in March and the breach of support at $12.25 that has taken the shares to their current trading value.

At this point TLM may have to retest the five year lows around $9.19. Until there is a trend reversal I wouldn’t be chasing this one.

Make it a profitable day and happy capitalism!

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