Vero Energy Inc. has moved higher on thin volume

Jul 30th, 2012 – Comment

Yes, the shares have made a nice move off a rock bottom but much of the advance has come on thin volume.


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Hi Lou,

Love your commentaries and analysis. I was wondering what your thoughts were on Vero Energy? It is currently low, but then again most things are now.

Thanks,

Matt

 

Hey Matt,

Thanks for your kind words they are very much appreciated! Vero Energy Inc. (VRO TSX) has been selling off for close to 30 months from the highs it hit near $7.00 in early 2010. The decline was gentle at first and then became very aggressive taking the shares to a fifty two week low of $1.49 on June 28, 2012. There has been some buying that has come in over the last month but if you look at the volume of shares trading it makes me wonder if the move up is a head fake. The average daily volume for the shares over three months is 132,106. In the last thirty days the volume of shares traded has only exceeded the average ten times.

A review of the charts will help determine if the current lift in the stock has more to offer investors.

 

 

The three-year chart says it all. The established downtrend line from the the 2010 highs, along with the death cross that formed in October of 2010 indicated that the shares were in trouble and that the prudent investor should re-evaluate their investment. What is clearly observable for the period February 2010 through July of 2011 is a series of lower highs and lower lows. Also of note was the resistance that formed along the 200 and 50- day moving averages and the complete inability of the stock to hold support at $5.50, $4.50, $3.50, and $2.50.

 

 

 

 

The six-month chart provides a better view of the resistance along the 50-day moving average and the buy signal that was generated by the MACD and the RSI in late June of 2012 as the shares hit the  52 week low. Given the information at hand I would advise caution. Yes, the shares have made a nice move off a rock bottom but much of the advance has come on thin volume. The downtrend is still in place and you need to respect what it is telling you.

 

Make it a profitable day and happy capitalism!

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